This past Election Day, voters approved a referendum that made restrictive covenants (such as agreements not to compete, solicit another's customers, or divulge their confidential information) more enforceable in Georgia. Subsequently discovered errors, however, cast doubt on the constitutionality of the new law. Therefore our state legislature passed the same statute (with a few changes), and on May 11, 2011, Governor Deal signed into law the “newest” set of restrictive covenant statutes. The significance of this unusual history is that whether an agreement concerning restrictive covenants is enforceable may now depend upon when it was signed.
Clearly, covenants entered into before November 2, 2010 are governed by the “old” law as established by numerous cases over the years. It is likely that covenants entered into from November 2, 2010 to December 31, 2010 are similarly governed by the “old” law. Those laws are generally pro-employee.
We also know that covenants entered into on or after May 11, 2011 are governed by the newest law. Those laws are generally pro-employer.
But what of the covenants entered into from January 1 to May 10, 2011? In all likelihood, we will have to wait until the courts tell us which law applies. Those who prefer not to be part of the case that decides that outcome are well advised to execute a new agreement to assure that the newest law will be used to determine their contract’s enforceability.
In addition, any previously unenforceable agreement may now become enforceable if it complies with the newest law and is re-signed after May 10.
KKG attorneys litigated several of the key Georgia cases that defined restrictive covenant law over the years. We fully understand the pros and cons of both the old law and the new. If you have any questions regarding restrictive covenants, how the newest law affects you, and what steps you should take because of the dramatic history of these Georgia laws, please contact us.