While this blog focuses on the continuing evolution of the law of non-competition agreements and related issues in Massachusetts, we occasionally look to notable cases and legislative developments in other states. What happened in Georgia last week certainly can be described as notable.
Here in Massachusetts, we have spent the past three years debating whether to abolish or substantially limit the enforcement of noncompetes. The principal rationale for doing so would be to remove what is perceived as an inappropriate obstacle to labor mobility and, ultimately, economic innovation and growth. In the context of our current debate — which will continue as legislation to curtail enforcement of noncompetes will be reintroduced during the next legislative session — what the voters of Georgia just did would be unthinkable.
Until now, Georgia generally was regarded as a state in which it was very difficult to enforce a noncompetition agreement. While noncompetes theoretically could be enforced there, they had to be perfectly drafted for each individual employee’s situation. Georgia’s constitution prohibited judges from modifying a noncompete clause to be reasonable under the circumstances. If the clause as drafted was unreasonably broad, it would not be enforced.
As described here and here, a significant component of the Georgia business community pushed to make noncompetes more easily enforceable. To accomplish this, however, the Georgia constitution had to be amended, which meant that the issue had to be put before the voters as a constitutional amendment.
As described here, the debate over what became known as Amendment 1 “boiled over onto Twitter and local news outlets, where businesspeople and members of the public contended that the Amendment would stifle innovation in Georgia in a large Vote No campaign.” Last week, the voters of Georgia overwhelmingly approved Amendment 1, the text of which perhaps could be read as preordaining the result:
Shall the Constitution of Georgia be amended so as to make Georgia more economically competitive by authorizing legislation to uphold reasonable competitive agreements?
(The issue may have been better described as whether to uphold reasonable non-competition agreements.) The legislation referred to in the Amendment was passed by Georgia’s legislature and can be found here. As a result of the amendment, among other changes, courts in Georgia now will be permitted to modify a noncompete to make it reasonable under the circumstances. More generally, employers will have more confidence going forward that they will be able to enforce in Georgia courts reasonably tailored noncompetes with their employees.
Whether that result will be good or bad for Georgia businesses will remain to be seen.