Amendment on ballot would strengthen non-compete agreements

By Steve Visser

The Atlanta Journal-Constitution

Georgia businesses want better control of former employees who might get job offers from competitors, and they are backing a proposed constitutional amendment on the Nov. 2 ballot to limit those employees' ability to work in their field.

Amendment 1 asks if voters would support giving the Legislature the right to pass laws to make Georgia more economically competitive. But opponents of the amendment say it actually protects businesses from competition, by allowing them to put broader non-compete agreements on employees.

The Legislature already has a more restrictive law in the pipeline, and critics say the amendment will allow lawmakers to write even more restrictive laws in the future. Certain employees -- from salespeople to managers -- sign such agreements as a job requirement.

Advocates, however, say the current state constitution, which prohibits the Legislature from making laws that restrict competition, often undermines legitimate non-compete agreements. Judges won't uphold the agreements in part while voiding unconstitutional sections -- even when the former employee is clearly in violation of a part that the judge deems constitutional. The agreements stand or fall in their entirety.

Thomas Moore, a financial adviser in Sandy Springs who has signed a non-compete agreement, feared if the courts are allowed to start upholding contracts in part or editing "reasonable" contracts to make them constitutional that businesses will increase restrictions, knowing that many employees won't have the money for a lengthy court fight.

"If somebody is going to create a non-compete contract, then it needs to be a legitimate non-compete contract,"  he said. “I don’t think you should be able to create a document that is 20 pages long and has a million covenants in it in the hope that the court will uphold one. I think it should be concrete for Day One.”

A Georgia businessman thought he had an ironclad non-compete agreement with a new employee he hired to handle sales at his company. The employee had access to confidential information about customers, and the agreement prohibited her from soliciting those customers.

But while the court found the confidentiality agreement was valid, it voided the non-compete agreement because a clause in another section didn't give a time frame for the non-compete agreement as required -- even though the time frame of two years was referenced in another clause, said Shawn Anton Kachmar, the lawyer who represented the businessman.

"It was a ridiculous result," Kachmar said. "Courts have come up with rules, and sometimes the rules aren't very clear. ... Having a statute in place that sets clear bright lines and clear bright rules will be helpful in bringing clarity to the law.”

Other lawyers said the case law was clear and that any new statute will create more litigation as lawyers test what the court will find reasonable in the non-compete agreements.

"The constitutional amendment takes away the authority from 100 years of court decisions that have crystallized the law and gives that authority to the Legislature that can do almost anything," said Charles Cork, a Macon lawyer. "Employees are going to be giving up a lot if this amendment gets passed."

Both sides acknowledge businesses have a legitimate reason to require non-compete agreements to, say, stop a salesperson from going to a competitor and soliciting customers that he or she cultivated while working for the first employer or not working for a competing employer, usually for two years.

But business advocates contend judges should be able to edit the agreements to make them constitutional and decide whether agreements are reasonable.

They also contend that the Legislature should be able to expand how much protection is given to businesses at the expense of former employees.

“Generally non-compete agreements are to protect businesses, and the Georgia Constitution, statutory law and case law are very narrowly drawn to prohibit employers from stopping people from earning a living," said Ellen Taylor, an expert on contract law at Georgia State University. “The philosophy in the constitution has been that non-compete agreements are restraints on trade and they keep people from earning a living and should be very narrowly drawn with the onus on business.”

Erika Birg, an Atlanta lawyer actively advocating passage of the amendment, said the courts have been unfair to companies regarding the non-compete agreements, and conflicting decisions muddle the case law governing the agreements.

“Georgia courts are hostile to non-compete agreements,” she said.

State Rep. Kevin Levitas, D-Atlanta, contends the amendment would permit a proposed statute that would make the law fairer for both businesses and employees. Levitas, vice president of Hill Manufacturing Co., said most states allow courts to modify the agreements.

Levitas said the courts have been hostile to the agreements because judges have felt the courts should protect employees from making decisions that might not be in their best interests.

Moore, the 33-year-old financial adviser, said that employees need some protection from the courts, especially when they feel compelled to sign the agreements to get or keep a job.

“The employer and employee are not on an equal footing when the contract is entered into -- the employer has all the bargaining power," he said.