Lawmakers scramble over mistake involving non-compete law

By Aaron Gould Sheinin

The Atlanta Journal-Constitution

A legislative snafu could delay or even derail a new voter-approved amendment to the state constitution that okayed employers' signing workers to non-compete agreements.

A discrepancy in legislation leading up to the constitutional amendment adopted by voters on Nov. 2 leaves the new rules vulnerable to legal challenges and has supporters planning a fix when lawmakers return to session in January. Meanwhile, legal experts are warning clients not to enter into agreements under the new rules until the situation is resolved.

"It's just unfortunate that we didn't have some better insight about that language," House Judiciary Committee Chairman Wendell Willard, R-Sandy Springs, said.

Amendment 1, overwhelmingly approved by voters in the Nov. 2 election, allows Georgia businesses better control of former employees who might get job offers from competitors. But, because of a discrepancy over the start date for the new rules as authorized by the new law, Willard and labor lawyers are warning employers not to execute new non-compete agreements until the problem is solved.

The issue stems from a lack of consistency between two pieces of legislation and the question on the ballot. In 2009, lawmakers approved legislation that would let employers put more restrictive limitations on employees' future work. Non-compete agreements were allowed in Georgia, but the courts had broad powers to ensure that they were limited in scope. For the 2009 law to take effect, Georgia's Constitution had to be amended to reflect the change and give judges the ability to edit agreements and not just overturn them.

Lawmakers agreed to put the question to voters in November, when the amendment received more than 67 percent of the vote.

But, House Bill 173, which created the 2009 law, said it would take effect Nov. 3, the day after the constitutional amendment was approved voters. House Resolution 178, which authorized the question to be placed on the ballot, did not include an effective date.

The state Constitution, however,  includes a provision for such events and it says the new rules should take effect Jan. 1.

But, given that non-compete agreements are often challenged in court, and that a new system for the restrictive covenants could be a prime target for lawsuits, some lawyers are saying any agreement signed under the new rules is ripe for being tossed out.

Brian Harris, an employment lawyer with Morris Manning and Martin in Atlanta, said that at the very least no agreement signed between Nov. 3 and Jan. 1 is likely to be valid. But Harris also said he isn't sure the new law can be considered constitutional because of the discrepancy.

"I don't think that answer is clear," he said.

Harris said he is advising his clients not to execute any non-compete agreements until the issue is settled.

Willard said he's confident that will happen quickly once lawmakers return to Atlanta on Jan. 10.

"I expect to remove any question or doubt about where we stand with it," Willard said.

John Krueger, senior vice president for public policy at the Georgia Chamber of Commerce, said that organization believes any agreement entered into after Jan. 1 would be perfectly valid. But, they support Willard's efforts to bring clarity.

"If  he believes it's necessary, we'd be supportive of him making whatever changes are necessary," Krueger said.

Erika Birg, an attorney with Seyfarth Shaw, said she considers the issue "a hiccup" that should be fixed easily. But even if a legal challenge was mounted, Birg said the court would look at the intent of Legislature, which was that the new law take effect Nov. 3.

Willard said legislation will have to go through the committee process and be voted on by the full House and Senate and sent to incoming-Gov. Nathan Deal for approval. Under normal circumstances that process can take months. When expedited and when there is broad agreement among lawmakers, it can be done in days.

Whether that happens, however, remains to be seen. While voters supported the amendment in huge numbers Nov. 2, there was fervent opposition to the new rules.

The amendment was supported by business interests, including the Georgia Chamber of Commerce. But it was opposed by many venture capitalists and technology companies worried that it would stifle new investment in the state and hurt their ability to recruit talented employees who would not want to be bound to a company or have their future earning ability limited.

While the 2009 bill and the 2010 resolution won approval in the General Assembly by overwhelming margins, if opponents mobilize to block the legislative fix in January, it could slow down that process.

Rep. Brian Thomas, D-Lilburn, was among the 22 lawmakers who voted against HB 173 in 2009. He said Wednesday that it's unlikely sufficient forces could be mounted to block Willard's efforts.

"Certainly if it comes up I'll try and articulate more clearly what my concerns are about it," he said. "But, yeah, I wouldn't imagine it being easy to stop them."

But if the entire bill is up for consideration, not just the effective date, Thomas said he could envision an effort to strip what he considers the most egregious parts, including language that says non-compete agreements could last for three years.

Lance Weatherby of Atlanta helps launch start-up tech companies and shared Thomas' pessimism about the chances of blocking the legislation.

"It will be very difficult to create enough opposition that the Legislature doesn't actually vote to overcome whatever technicality is there,"  he said. "Though my representative will hear about it. That's all I can do, right?"