At both the state and federal level, there has been a great deal of legal activity related to the use of restrictive covenants, many of which bar an employee from going to work for a business competitor. While the Federal Trade Commission’s attempt to establish a rule that would bar most noncompete agreements still faces legal challenges, a Georgia case concerning the geographic scope of restrictive covenants has been resolved.
In a significant decision, the Georgia Supreme Court recently ruled in North American Senior Benefits, LLC v. Wimmer that restrictive covenants, specifically noncompete agreements, do not require a definitive geographic limitation to be enforceable. This decision reversed a lower court’s ruling and has clarified that noncompete agreements in the state are enforceable as long as they are reasonable in both geographic and temporal scope.
In the case, NASB sought to enforce a noncompete agreement that did not specify a precise geographic area but rather prohibited former employees Ryan and Alisha Wimmer from engaging in competitive activities within the territories where they had worked during their employment with the company. When the Wimmers challenged the enforceability of the document, the Georgia Court of Appeals agreed that the lack of a specific geographic limitation rendered the agreement invalid under state law.
However, the Georgia Supreme Court disagreed, finding that a restrictive covenant does not require an exact geographic description as long as it meets the broader standard of reasonableness in regard to location, time and prohibited activities. Moreover, the justices said that the noncompete was reasonable because it was limited to the areas where Wimmers had developed relationships and built a client base through their work with NASB. Accordingly, the Court held that the agreement sufficiently protected NASB’s business interests without being unduly restrictive.
This decision is a notable clarification of Georgia’s noncompete law and offers guidance for employers drafting restrictive covenants. While a specific geographic limitation is no longer strictly necessary, including detailed language on this subject might be useful to avert a potential dispute about where the boundaries lie. In all cases, employers that choose to establish restrictive covenants should draft their language as if the reasonableness of the terms could be tested in court. For employees, this ruling underscores the importance of understanding the terms of any noncompete agreement they enter into, and consulting with legal counsel if they have a question or concern.
The Reddy Law Firm, P.C. in Alpharetta handles all types of legal matters relating to restrictive covenants on behalf of Georgia employees and employers. For a consultation regarding your particular issue, please call 678-629-3246 or contact us online.
