Is My Non-Compete Agreement Enforceable?

Non-compete Agreements are a critical component of protecting your business from being sabotaged from the inside by workers who leave and take "your business" with them. Non-compete agreements have long been one of the most highly contested areas of Georgia law and are a hot bed of litigation for employees and employers alike. Non-compete agreements are signed by both an employee and employer in order to limit what a worker/employee can do in the event that they leave their present employment.

Georgia is a "right to work" state as well as a "fire at will" state generally allowing workers to come and go as they please will giving employers the ability to cease the employment of any employee at any time and for any reason. Non-compete agreements are essential for many businesses to protect their client list, trade secrets, customer base, on-going goodwill, and from losing market share as a result of an employee who leaves taking with them items, information, and knowledge which otherwise can be protected by agreement.

"I believe all employees should have a right to work and that they should not be unduly restricted by a non-compete from doing so. I also believe all businesses have a right to protect themselves from employees learning their business and then taking their clients with them. At my own Duluth Georgia CPA firm I have had non-compete agreements that did just that for I was not concerned with an employee leaving; I just wanted to be sure they left my clients with my firm!"
— John Dillard CPA

Generally, non-compete agreements need to be:

  • Limited in scope. Agreements should be very specific as to what capacity an employee can fulfill when leaving employment. Care should be exercised to ensure that the future capacity is narrowly defined as possible and is most similar to the present skills a worker performs. Any agreement that is too broad in definition will not be enforceable such as "working in any capacity within the industry."
  • Limited in duration. Agreements should be narrowly defined as to time. An agreement that lists a longer than shorter period will not be enforceable as it would unduly limit a workers ability to work.
  • Limited as to geographic proximity. Agreements that limit the locations where a worker can gain employment to a wide geographic area (such as the East Coast) will not be able to be enforced. Generally, workers can be limited to a fairly narrow defined area, best defined as what a present employee serves.

Georgia at present is a "blue pencil" state, which means that if any portion of the agreement is found to be too broad or restrictive then the entire agreement, and not just the offending portion, is voided. This means employers must draft agreements that protect only their legitimate business interests, rather than an agreement which is set out to punish or to intimidate a worker. The Georgia Constitution is the predominant basis for its being a "blue pencil" state, as contracts which restrain trade or defeat free enterprise are void with the entire agreement being unenforceable.

Non-compete laws vary from state to state as well as do their ongoing interpretation under the law. Therefore, when contemplating either drafting or signing a non-compete agreement, it is essential to retain the services of an attorney who has exhaustive experience in this area.

Georgia Non-Compete Tax Law Update

Georgia law was signed on November 3, 2010 updating the prior law above that existed beforehand. Under the new law Georgia non compete agreements signed after November 3, 2010 now allow judges/courts the ability to enforcing non-compete agreements which were previously unenforceable. Be sure you work with a Georgia attorney who is well versed in Georgia law to answer your questions before they become problematic.

At His CPA, P.C. we treat you as more than a customer. We truly value your business and desire to service you and your accounting needs to the best of our ability. Put our part-time CFO services to work for you and your business. Contact HIS CPA PC (A Christian CPA Firm) today.