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Understanding Covenants Not to Compete: Key Insights for Employees and Employers

This overview examines covenants not to compete, clarifying their scope and enforceability. From non-employment agreements to those related to the sale of a business, it highlights examples like Joe the Baker and Brenda Wood, who agreed to specific limitations on employment options after leaving their roles. The discussion also covers geographic limits, duration considerations, and state law variations. With recent changes in Georgia law allowing for reasonable agreements, this guide serves as a vital resource for understanding how these covenants operate across different jurisdictions.

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Understanding Covenants Not to Compete: Key Insights for Employees and Employers

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  1. Covenants Not to Compete Jody Blanke, Professor Computer Information Systems and Law

  2. Covenants Not to Compete • Non-employment related • related to sale of business • e.g., Joe the Baker • Employment-related

  3. Brenda Wood • Brenda Wood agreed not to work as an on-air news anchor in the Atlanta/Athens television market for 6 months.

  4. Covenants Not to Compete • Scope • agreement must specify what activity is to be limited • Geography • be careful of terms like Atlanta • Duration • e.g., 6 months, 1 year, 2 years

  5. Laws Vary From State to State • California will not enforce such an agreement as an illegal restraint of trade • Georgia used to be very strict about enforcement of these covenants • would not “blue pencil” such an agreement

  6. Election Day 2010 • Georgia Constitutional Amendment • “Shall the Constitution of Georgia be amended so as to make Georgia more economically competitive by authorizing legislation to uphold reasonable competitive agreements?” • 68% said “Yes”

  7. O.C.G.A. § 13-8-50 et seq. • Courts may now “blue pencil” the agreement • Two years is presumed reasonable • Need not specify a geographic restriction • Law targets “key employees” • executive employees • employees in possession of important confidential information, or • employees with specialized skills, knowledge, or customer contacts or information

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