House Bill 30, designed to substantially reenact the substantive provisions of the new Georgia Restrictive Covenants Act passed in 2009, was passed by the Georgia House of Representatives in a 104-58 vote on Tuesday, February 22, 2011. The bill now moves to the Georgia Senate for consideration.
As discussed in earlier alerts, the new Georgia Restrictive Covenants Act (the "Act"), which dramatically changes the enforceability of restrictive covenants in employment agreements, was intended to take effect on November 3, 2010, immediately following Georgia voters' ratification of a Constitutional amendment designed to give effect to the Act. However, because the Constitutional amendment itself failed to include an effective date, the amendment did not take effect until January 1, 2011, two months after the Act. As a result, the Act was exposed to possible constitutional challenge, including questions as to whether it did or could take effect as intended. In order to remove any uncertainty, State Representative Wendall Willard introduced a nearly identical bill, House Bill 30, when the House reassembled in January.
If the bill passes through the Senate as expected, it will go into effect immediately when the Governor signs it, but will not retroactively apply to any contract signed before it takes effect. Employers with employees in Georgia should consider whether to implement new contracts with employees designed to comply with and extract maximum benefit from the Act. Employers should evaluate which of their employees are subject to broader restrictions under the new Act. New contracts should include covenants that (1) restrict a broader scope of activity, including a possible noncompete restriction from appropriate employees, (2) are susceptible to judicial modification, if necessary, (3) rely on updated definitions, and (4) remain applicable for the maximum statutory time periods after termination of employment.
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