Enforceability of Non-compete Agreements
The Enforceability of Non-Competition Agreements and Other Restrictive Covenants in Georgia
Our Atlanta and Augusta, Georgia business and healthcare law firm advise and represents physicians, medical practices, FQHCs, other healthcare-related businesses, and other businesses and professionals with regard to the enforcement of non-compete agreements, non-solicitation agreements, non-disclosure agreements and related restrictive covenants. Whether a particular restrictive covenant is “enforceable” is not always clear and often can involve significant legal uncertainty, which uncertainty invariably strongly impacts the development of a proper strategy for either party to a dispute about whether specific activities violate the covenant.
Georgia Non-compete Lawyers
Whether an Atlanta or Augusta employer, business seller, business partner, or former employee, the understandable inevitable first question to legal counsel is, “Is this non-compete agreement enforceable?” In our experience as Georgia non-compete agreement lawyers, the appropriate answer will rarely be “yes” or “no.” Generally speaking, such issues must be analyzed carefully on a case-by-case basis without any formulaic way to assure a definitive advance answer, particularly where it is impossible to know how any particular judge in litigation will, once the issues are refined and evidence fully presented in an adversarial context, view the circumstances and weigh the parties’ competing interests to apply the law.
The uncertainty of enforceability notwithstanding, experienced trial counsel can often provide helpful, effective guidance by assessing the strengths and weaknesses of a non-compete agreement or other restrictive covenant to inform a client’s decision making process and development of the most sound strategy. For example, experienced Georgia trial counsel can show a client that Georgia courts will apply varying levels of scrutiny to restrictive covenants according to the respective parties’ bargaining power. The highest level of scrutiny (i.e., the most difficult non-compete to enforce) is applied to employment agreements. A mid-level of scrutiny is applied to restrictive covenants in a partnership agreement. The lowest level of scrutiny is applied to covenants in a transaction such as a purchase or sale of a business. A trial judge may delve in a fact-intensive way into the evidence that reflects upon the parties’ respective bargaining position. In some circumstances, what level of scrutiny should apply can be a muddied legal question for a judge because the facts presented may involve elements of more than one of the above situation (for example, the covenant may be in an employment agreement executed by the seller of a medical practice).
What level of scrutiny applies is potentially very important because it may impact how a judge evaluates his or her ability to utilize Georgia’s “blue pencil” rule to enforce (or strike down) a covenant. If applying a low level of scrutiny, the court may be more inclined to liberally blue pencil an agreement to fix its imperfections; conversely, if the highest level of scrutiny is applied, the court may be more inclined to strike down a restrictive covenant altogether if any aspect of it appears to be overbroad or unreasonable.
In addition to the application of the appropriate level of scrutiny, a court will typically evaluate the reasonableness of a restrictive covenant based upon its duration (time), geographic scope (territory), the scope of the prohibited activity. Courts may also indicate consideration of “policy” factors, often a malleable concept that offers little advance guidance to predict enforceability. The best way to gauge whether a covenant’s duration, territorial scope and/or scope of restricted activities will be viewed by a trial judge as reasonable is by exhaustive legal research to locate published court decisions that involve analogous fact patterns. The process of properly finding and evaluating such decisions, each of which can be involved factually and legally and warrant careful review, is often time-consuming and highly tedious (if done correctly). Nevertheless, where the financial stakes for the parties are sufficiently meaningful, retaining qualified counsel to undertake such efforts can often be very beneficial and warrant such expense.
Proper assessment of the enforceability of a non-recruitment agreement, confidentiality agreements, non-disclosure agreements, and patient non-solicitation agreements likewise warrant careful evaluation of numerous factors. The existence of such an agreement does not mean that it is valid. Nevertheless, such an agreement and its potential impact upon either party to the agreement should never be discounted or taken lightly.
If you have questions about the enforceability of a restrictive covenant. Our offices are located in the Four Seasons Building in Midtown Atlanta and in Enterprise Mill in Downtown Augusta, Georgia. Hamil Little is a focused business and healthcare law firm with significant experience negotiating, drafting and litigating numerous non-compete agreements and other restrictive covenants for employers, employees, partners, buyers, and sellers.