Georgia Enforces Non-Competes

On November 2, 2010 Georgia voters approved a stunning 180-degree change in their state Constitution. The one-sentence ballot measure (Amendment 1) was simple enough:

Shall the Constitution of Georgia be amended so as to make Georgia more competitive by authorizing legislation to uphold reasonable competitive agreements?

By voting “Yes”, a majority of Georgia voters upended the state’s strict prohibition against enforcement of employment agreement “non-competes.” In doing so, they breathed life into the Official Code of Georgia, Sections 13-8-2.1 and 13-8-50 to 59.

This new series of laws states that Georgia state and federal courts are required to enforce any “reasonable” post-employment restrictive covenant (restraint against an ex-employee). There must be no “extreme hardship” to the ex, and the covenant (contractual promise) must be “not so clearly unreasonable and overreaching in its terms as to be unconscionable” (shocking to the conscience). What’s “reasonable”, “extreme hardship”, “unreasonable”, “overreaching” and “unconscionable.” will be up to the courts to decide on a case-by-case basis.

However, now placement businesses in Georgia will be able to obtain:

Injunctive relief. This is designed to stop the ex-employee from competing. The three procedural devices (court processes) to do this are an immediate Temporary Restraining Order (TRO), a Preliminary Injunction (pending a trial) and a Permanent Injunction (at the time of trial).
Compensatory damages. Compensation (money) to reimburse the owner for a documented loss of placement fees, loss of candidates, loss of clients, loss of future business, and loss of any other thing else that can be quantified into a dollar amount.
Punitive damages. Money in an unlimited amount in the discretion of the judge or jury to punish the competing ex.
Exemplary damages. Money in an unlimited amount in the discretion of the judge or jury to set an example of the competing ex so other recruiters won’t engage in similar conduct.
Attorney’s fees and court costs. These are often high, because these lawsuits are complicated legally and factually.

What placement businesses in Georgia won’t be able to obtain are:

Enforcement of their existing agreements. The new laws don’t apply to any agreements executed prior to January 1, 2011.
Redrafting of their agreements by the courts. Although the new laws give the courts the authority to blue pencil (modify) the terms of agreements that are deemed too restrictive (usually as to scope of activities, length of proscriptive time or distance), don’t count on it. Judges are busy, employment agreements are disfavored (ex’s have no choice in signing them and they prevent future moneymaking), and ex’s cry in court. Authorizing courts to rewrite the wrongs is a judge joke that makes litigators laugh.

Long-time Fordyce readers will remember when I wrote California Business and Professions Code, Section 16607 in 1973. By having it enacted into law, we expanded the rights of placement business owners. (A Georgia-type law in California prohibited enforcement of restrictive covenants.) Section 16607 still blasts the placement pavement like a 220-volt jackhammer.

We win because we fortify the law. We use properly-drafted, industry-specific, state-specific, constantly-updated agreements. If this sounds like yours, keep it. But fair warning — fully 80% of the agreements are unenforceable. Many even illegal! How do you know? When do you know? When you try to enforce it? N-n-n-not so good.

In most cases, you’d be better off turning the pages upside down and writing on the blank sides. At least you’d be saving a tree. I don’t care how many lawyers the firm had or whether you copied that agreement from someone who’s in a franchise. (Yes, I know who. No, I won’t report you. But when did they get it?)

Stop kidding yourself about this now, and get that agreement checked by a competent plaintiff’s employment litigator. The operative words here are “plaintiff’s”, “employment” and “litigator.” Miss any of the three and you can save your free consultation fee.

Be sure not to use a transactional lawyer who drafts agreements and related gobbledygook for “transactions.” These folks are like the people in your office who spend their time doing everything – anything – but cold-calling for job orders and candidates. Oh, they talk the talk. Oh, how recruiters and lawyers can talk.

You can usually tell if someone’s a transactional lawyer because they’re nicer. Unless the litigator just won a case. But how do you know whether he’s always that way? It’s a big problem – unless you’re a recruiter.

Do what you always do. Ask around. Another way is to stake out his office and follow him when he drives away. If he keeps driving to courthouses (and returning – they have holding cells there), he’s your guy. This is because your lawyer must be inside courtrooms litigating employment law cases now. Otherwise, he doesn’t have the current, real-world experience to even draft the words “Recruiter Employment Agreement.” (Bad enough he doesn’t know the difference between a job order and a fee schedule.)

For much more free information on this subject, go to www.placementlaw.com and click on the “Placements and The Law” button.