Let’s have a conversation. Let’s have a conversation about Non Compete Agreements (otherwise known as covenants not to compete). You may be tempted to try and draft your own. After all, you have built your business and you don’t want former employees opening up shop around the corner from where you are based. Understandable. However, you need to understand that the law on this subject has recently underwent some changes you should be aware of and I would like to explain the DANGERS of attempting to draft your own non-compete agreement or clause for an employment contract.
Non-compete agreements (or covenants not to compete) are agreements or clauses that restrain former employees’ ability to compete against a former employer. Sometimes they are detailed, separate agreements and sometimes there are 1 or 2 non-compete clauses in an overall employment agreement. Either way, the advice is the same; see below.
Why You Should NOT Draft Your Own Non-Compete Agreements/Clauses:
Simply put, these can be tricky to draft. Courts in Georgia generally don’t favor these type of agreements/clauses because they restrain trade, i.e. they restrain a person’s ability to work and be employed and the Georgia Courts have a vested interest and wider public policy incentive to make sure that every person is employed and can contribute to society, i.e. taxes. Therefore, these agreements/clauses have to be narrowly tailored, specific and give clarity to the Court and the restrained employee exactly what, who, where, why, when and how they can conduct business after leaving the present employer. The key here is specificity and restrained terms and you need a legal mind that can research the law to understand what is judicially acceptable.
A few things to note:
1. These agreements/clauses must pass a 3 part “test”– They must be limited in TIME, SCOPE and LOCATION. The previous rule (before July 1, 2010) was that if ANY PART of this test failed (i.e. the agreement was limited in time and scope but not in the location because was too broad), the entire clause FAILED so it was as if the non-compete agreement/clause did not exist.
2. “Blue Penciling” Allowed- The Georgia Legislature passed in 2010 a rule that makes it acceptable for courts to “blue pencil” provisions; this means that if one part of this three (3) prong test is invalid because its too broad, onerous or ambiguous, the Judge can revise the agreement to make it fall acceptable so the whole agreement or clause does not have to be invalidated. The legislature did not provide for this to be retroactive so this new blue penciling allowance only applies to contracts made AFTER taking effect which would be on or around July 1, 2010.
3. These agreements/clauses must provide clarity with other provisions in the agreement. For example, if there is a mention of “clients” in the non-compete agreement, the definition of “client” must be specifically defined elsewhere in the agreement or risk being invalidated as being unclear.
What’s my point? DO NOT draft these provisions on your own. Hire an attorney or Kendrick Law Practice (www.kendricklaw.net) to draft these agreements/clauses for you or risk a nonpartial Judge, who doesn’t know or understand your business, re-drafting it for you or the entire agreement or clause being invalidated. DO NOT BE CHEAP—It’s WELL worth it in the future gains.
NOTE: Kendrick Law Practice is ONLY authorized to practice law in the State of Georgia. Any and all information contained in this post only applies to Georgia law and Georgia based businesses. No attorney-client relationship has been formed by this post or any comments thereafter.
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