Have You Asked Yourself These Dozen Questions About Your Non-Competes?

Have You Asked Yourself These Dozen Questions About Your Non-Competes?

Client Resources | June 21, 2018

Whether you’re an employer or employee, you probably want to know whether the restrictive covenant such as a non-compete clause (“non-compete”) or non-solicitation clause (“non-solicit”) will be enforced.  Here are a dozen questions that could make or break your restrictive covenant.

  1. Do any non-compete agreements date from before May 11, 2011?

If so, then Georgia’s 2011 Restrictive Covenants Act (the “Act”) likely will not apply.  And a non-compete or non-solicit will likely be harder to enforce against a former employee.

  1. Does the employee signing the non-compete have a customer-facing sales role or a significant management role?

If not, the Act may not allow a non-compete.  For more information see our article on “Is Your Non-Compete Enforceable Against That Employee?”

  1. Does the agreement have a non-compete, a non-solicit, or both?

Perhaps more people are aware of non-solicits, which prevent former employees from going after certain customers, than of typical non-competes, which can prevent any kind of work for a competitor.  Non-solicits tend to be easier to enforce.  For example, under the Act, Courts will almost always enforce non-solicits covering customers with whom a former employee extensively worked.  But non-competes have several more requirements to meet, including specific limits on the type of employee who can sign an enforceable non-compete.  That said, some clauses in contracts look like a combination of a non-compete and a non-solicit.

  1. Has the employer breached the agreement in any way?

If so—perhaps the employer has not paid required bonuses or salary—the employee may have an argument that the restrictive covenants no longer apply.[1]

  1. Did the employee have access to confidential information or trade secrets?

Most employers will quickly say yes.  But did the employee really have access to non-public information that would be valuable to competitors?  If not, a non-compete will be hard to enforce.

  1. Does the non-compete ban the employee from taking any position or having any affiliation with anyone in the industry?

If so, the non-compete may be overbroad and unenforceable.

  1. Does the non-solicit apply to customers or potential customers with whom the employee had no relationship?

If so, the non-solicit may be overbroad and enforceable.  A non-solicit that bans unsolicited contact or all contact with certain customers may also be overbroad and unenforceable.

  1. Does the non-compete ban the employee from working in a geographical area that the employer does not do business?

If so, the employer may not have enough of a business interest to enforce the non-compete.

  1. Does the non-compete ban the employee from working in a geographical area that the employee did not work in for the employer?

While less problematic than a yes to the previous question, if so, the employer may still not have enough of a business interest to enforce the non-compete.

  1. Does the non-compete ban the employee from activities the employee did not do for the employer?

If so, the non-compete is likely harder to enforce.  But broad access to trade secrets or a far-reaching executive role might justify a ban on activities larger than those the employee performed for the employer.

  1. Does the non-compete or non-solicit apply to customers or information of the employer’s affiliates to which the employee may have not had access?

If so, the non-compete or non-solicit will be harder to enforce because the employer may lack a business interest or because the restrictive covenant may be unreasonable.

  1. Will the non-compete make it hard for the employee to earn a living?

If the employee has no other options for making a living, the court will be less likely to enforce the non-compete.

Conclusion

As all these questions and answers show, the circumstances of each employee can be important when trying to enforce a restrictive covenant in litigation under the Act.

[1] See Marcre Sales Corp. v. Jetter, 223 Ga. App. 70 (1996).

 

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