High Tech Will Like Georgia Amendment, but Voters May Have Regrets

High tech companies in Georgia must be smiling. Yesterday, the voters approved a constitutional amendment that made the state far more tolerant of restrictive covenants on employment contracts, measures that technology companies (among others) often impose on workers. However, victory has come with a helping of controversy, as the phrasing of the provision was, to put it charitably, open to misinterpretation.

Passed 67.6 percent to 32.4 percent, the amendment changes the effects of an anti-restraint-of-trade clause that was in the state constitution, according to Joe Shelton, a partner with Fisher & Phillips, a labor law firm that represents employers.

"Georgia has stood out like a sore thumb from most other areas of employment law," Shelton said. "Georgia courts have been fairly 'unfriendly' to restrictive covenants like non-competes and non-solicits." From a corporate view, there were multiple problems with how state courts interpreted employment contracts under the constitution, including the following:

• Confidentiality agreements had limits, generally of two years, but certainly not extending indefinitely. However, there is a state trade secret law.
• Non-competes needed a geographical provision that was explicit on the day an employee signed a contract so the person would know exactly where it applied. That presented difficulties if the locations in which someone worked changed over time.
• A contract could not prevent an ex-employee from accepting work offered by a client of the employer, although it could prevent solicitation.
• If there were problems with contractual language, a court would strike the clause rather than modify it to the extent reasonable.
• If a contract had both non-compete and non-solicit clauses and one was flawed, the court would toss them both.

The state legislature passed a statutory framework 20 years ago to address the issues, but state courts found it unconstitutional. Given the state's number of large companies, particularly in high tech and other heavily technology-dependent fields like logistics, you might wonder how much of a problem the employment contract issues really were.

Voters did overwhelmingly favor the amendment, but there is some question of how the provision was worded:

Shall the Constitution of Georgia be amended so as to make Georgia more economically competitive by authorizing legislation to uphold reasonable competitive agreements?

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