Today’s post is brought to us by our latest guest blogger, Matthew LaVallee. Matthew is a founding partner at the law firm of Daley, Koster, and LaVallee, LLC, located here in Atlanta. Matthew is an employment and business law attorney who offers a unique general counsel program for small to mid sized businesses. Matthew can be reached directly at 678-213-2401, via e-mail at mlavallee@dkllaw.com, and on LinkedIn.
As all of us small business owners know, there are several legal issues to deal with when starting a business. First you have to make a decision as to your legal form. Depending on the type of business you will be running, chances are you will be forming either a corporation, partnership, or sole proprietorship. Then there is the issue of taxes, be it sales taxes, income taxes, payroll taxes, or possibly property taxes. Licensing may also apply to your trade. The last thing you want to do is not be in compliance with the regulatory framework applicable to your business. Additionally, insurance is something most small businesses are required to carry, such as liability insurance, unemployment insurance, property insurance, or health insurance.
Far be it for me to throw yet another log onto the fire, but here is something else business owners in Georgia with Georgia employees need to be aware of. The law in the area of restrictive covenants just changed drastically. For years now, Georgia has been one of the most difficult states in the country for employers to draft restrictive covenants strong enough to sufficiently protect their business, but not too restrictive to be found unenforceable by the courts. When I say “restrictive covenants,” principally I am referring to non-compete, non-solicitation, and non-disclosure agreements. Restrictive covenants are particularly prevalent in the technology field, due to the portable and unique nature of the information employees at such companies possess.
The good news for business owners is that Georgia’s new restrictive covenants law is much more employer friendly. For example, Georgia courts were previously prohibited from modifying a restrictive covenant in order to make it enforceable. Instead, if any part of a restrictive covenant was deemed unreasonable the entire covenant had to be torn up, leaving the employer totally exposed. Under the new law, Georgia courts can now “blue-pencil” or modify a restrictive covenant that is found unenforceable, so long as the modification does not make the covenant more restrictive to the employee. This new change in the law is good for employers because now they can draft restrictive covenants knowing that even if a court finds part of the covenant too broad, the portions of the restrictive covenant that are found to be reasonable can still be enforced.
Additionally, under the previous law, courts frequently invalidated restrictive covenants that were not specific enough about the types of activities or products a former employee was prohibited from conducting or selling. Now, any description of competitive activities or products will withstand judicial scrutiny so long as it gives fair notice of the maximum reasonable scope of the restraint.
Furthermore, the new law allows courts to presume the reasonableness of certain time restrictions in restrictive covenants. For instance, restricting competition and solicitation of a former employee for a time period of two years or less is now presumed reasonable. Plus, the new law expands the definition of “material contact” used in non-solicitation agreements to the benefit of the employer. The new law also does away with time restraints for confidentiality agreements.
The new law only applies to restrictive covenants with executive employees, employees and independent contractors possessing certain confidential information, and to employees with specialized ability, knowledge, or customer contacts.
The bottom line is that business owners who want to utilize this new change in the law should revise their restrictive covenants with all applicable incoming and current employees. There was some controversy in the legal community over the effective date of the new law—November 3, 2010 or January 2, 2011. As such, if you are a business owner that executed new restrictive covenants in December 2010 to take advantage of the new law, consider having your employees resign the agreements.
If you have any questions regarding the new restrictive covenant law, it would be my pleasure to discuss such with you.
As Chief Operating Officer of wordZXpressed, I oversee the day to day operations, IT and marketing aspects of our business. I continue to serve as Project Manager for EHR/EMR interfaces with our customers as well as other IT functions. I am always interested in migration projects, implementation projects and emerging technologies in the healthcare industry. I am also a BIG fan of social media in business.
