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Customer Non-Solicitation Agreement with Employee Difficult to Enforce in Georgia

  • August 18, 2010

To protect their businesses, employers often seek to contractually prohibit employees from soliciting customers after employment ends.  Georgia's appellate courts have long frowned upon covenants in employment agreements that purport to restrict competition.  In striking a customer non-solicitation provision in an employment agreement because it prohibits a former employee from “merely accepting business, without solicitation,” the Georgia Court of Appeals in Fine v. Communication Trends, Inc., 2010 Ga. App. LEXIS 711 (2010), continues to adopt this stance.  Restrictive covenants in employment agreements must be carefully and narrowly drafted to remain enforceable in Georgia.

Current Law

A customer non-solicitation covenant is unenforceable if it prohibits the mere acceptance of business. “While a prohibition involving some affirmative act on the part of the former employee, such as solicitation, diversion, or contact of clients, may be reasonable, a covenant prohibiting a former employee from merely accepting business, without any solicitation, is not reasonable.” Waldeck v. Curtis 1000, Inc., 261 Ga. App. 590, 592 (2003).

Provision Struck

The non-solicitation covenant in Fine between Communication Trends, Inc. (“CTI”) and its former employee provided, in pertinent part:

4. Nonsolicitation of Clients. The Employee hereby also agrees and covenants with [CTI] that throughout the period of his employment and for a period of two (2) years immediately following cessation of Employee’s employment with [CTI], the Employee shall not solicit advertising media placement business similar to [CTI] on behalf of any persons or entity other than [CTI], either directly or indirectly, whether as a shareholder, partner, joint venturer, consultant, employee, officer, agent or otherwise, from any person or entity (or otherwise contact, call upon, communicate with or attempt to communicate with any such person or entity with a view to providing advertising media placement services competitive or potentially competitive with [CTI][.])

Emphasis supplied.

This provision, on its face, does not prohibit the mere acceptance of business.  The Court of Appeals, however, construed the italicized language as prohibiting the former employee from “otherwise” communicating with former clients to accept business not solicited by the former employee and regardless of who initiated contact.  Thus, the Court held this covenant void and unenforceable.

New Legislation

Employers soon may get some relief.  The Georgia Legislature has enacted new law (OCGA § 13-8-56) with principles governing determinations of reasonableness of restrictive covenants in future cases. See Ga. L. 2009, p. 231.  By this enactment, the legislature recognizes that restrictive covenants in employment contracts serve to protect legitimate business interests.

The statute, however, will only become effective if an amendment to the Georgia Constitution passes voter approval in the November 2010 general election. See Ga. L. 2009, p. 231, § 4.
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Employers should review their current agreements containing restrictive covenants to ensure they do not pose any Fine-type problems.  If you have any questions about protecting business information, including through the use of restrictive covenants, in Georgia, please contact the Jackson Lewis attorney with whom you regularly work.

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