In summer 2023, the Georgia legal community was abuzz with the recent decision by the Court of Appeals in N. Am. Senior Benefits, LLC v. Wimmer, No. A23A0162, 2023 WL 3963931 (Ga. Ct. App. June 13, 2023) (affirming a decision by the Statewide Business Court). We previously wrote about the decision here.
This case dealt with the interpretation of a non-recruitment of employees’ restrictive covenants under the Georgia Restrictive Covenants Act (the “GRCA”). Prior to the Court of Appeals ruling, most practitioners had assumed that a textual geographic restriction with respect to recruiting employees would be unnecessary because defendants/employees know the geographic location in which solicitation is prohibited—i.e. anywhere the plaintiff’s current employees are located. The Court of Appeals disagreed and refused to blue pencil the restriction at issue.
This decision caused many companies to rewrite their existing form non-compete agreements to accommodate this decision.
Now the Supreme Court of Georgia has weighed in, reversing the Court of Appeals.
Under the GRCA, courts will enforce “reasonable” restrictive covenants but modify or refuse to enforce unreasonable ones. Courts take a three pronged approach in analyzing the reasonableness of a restrictive covenant, which is reasonableness as to (1) duration, (2) geographic area, and (3) scope of prohibited activities.
Wimmer involved the second prong: reasonableness of geographic area. In short, the restrictive covenant at issue did “not contain an express description of the geographic area in which the provision applies.”
According to the Supreme Court, a geographic restriction did not need to be expressly stated to satisfy the GRCA’s reasonableness requirement. Rather, a court should look to “the facts and circumstances of the case” to assess the covenant’s geographic reasonableness. To come to this conclusion, the Supreme Court looked to the text and context of the GRCA to reason:
- “[N]othing in the text . . . mandates that a restrictive covenant contain an explicit geographic term, nor does [the text] prohibit a covenant’s geographic area from being expressed in implied terms.”
- As O.C.G.A. § 13-8-53(c) references a certain subsection of situations where a description of “activities, products, or services, or geographic areas” would be required by the GRCA. The implication, therefore, is that such a description must not be required in all circumstances.
- Because the non-recruitment provision inherently limited itself to recruitment from the employer, the covenant could be labeled as “presumed reasonable” as it “includes the areas in which the employer does business at any time during the parties’ relationship.”
The Supreme Court’s holding reversed N. American Senior Benefits v. Wimmer, 368 Ga. App. 124 (2023) and disapproved to the extent inconsistent CarpetCare Multiservices v. Carle, 347 Ga. App. 497 (2018).
Client Take Away: No action is needed. If employers rewrote their non-recruitment clauses to comply with the Court of Appeals decision in Wimmer, and the clause was otherwise enforceable, adding a geographic restriction should not impact the enforceability of those clauses. As always, we recommend that clients review their existing employment agreements at least annually to ensure enforceability.
