At the end of 2018, the Court of Appeals of Georgia issued a decision in a case involving restrictive covenants under the Georgia Restrictive Covenants Act.Specifically, in this case, Kennedy v. The Shave Barber Company, LLC (Georgia Court of Appeals Case # A18A1660, decided December 20, 2018) the issue was whether a barber at a barber shop could be subject to a covenant not to compete for a two year period after her employment ended, as well as a covenant not to solicit employees or customers of the shop for one year after leaving her employment at the barber shop.
According to the court's decision, Kennedy, the barber, signed an agreement with her employer, The Shave Barber Company.The agreement contained a provision that essentially said that for 2 years after the termination of employment, Kennedy would not compete with The Shave by owning or managing, or selling for another business that competed with The Shave, within a 3 mile radius of any Shave location.The agreement recited that Kennedy would be regularly and customarily soliciting for clients for The Shave, and it seems, from the court's opinion, that she did, in fact, regularly solicit for clients for The Shave.
Later, Kennedy resigned from the barber shop, and then opened up her own shop within 3 miles of the location where she worked.
The Shave sued, seeking an injunction against Kennedy, and for damages due to the breach of the contract.The trial court found the restrictive covenants reasonable and granted an injunction forbidding Kennedy from owning or operating a competing business within a 3 mile radius of The Shave, as well as forbidding her from soliciting or attempting to solicit any customer or prospect of The Shave with whom she had material contact, and from soliciting any employee or agent of The Shave.
Kennedy appealed the trial court's issuance of an injunction, and the case went to the Court of Appeals.Kennedy made all the expected arguments against the enforceability of the agreement, including arguing that: the geographic restriction was not reasonable and was not well-defined with certainty, that there was no legitimate business interest for the company to justify the no compete clause, that she was not the type of employee to whom could be subject to a no compete, and that the no compete clause was unreasonable in the scope of what was prohibited.
The Court of Appeals affirmed the trial court's ruling, noting that Georgia law allows an employer to use a covenant not to compete with an employee who customarily and regularly solicit customers, sells products or services, or have defined managerial, key employee or professional duties. The court explained that Kennedy agreed to this restriction, that she had direct, extensive contact with customers, and that she regularly solicited customers on behalf of the barber shop. Therefore , the court decided, she was subject to the restrictive covenant act, the restrictions were reasonable, and therefore let stand the trial court's decision.
So, what does this mean for you if you're an employer or an employee? It means that Georgia can and will enforce restrictive covenants in agreements with an employee when those restrictions comply with the law.
It also means that, if you are an employee, you should be very mindful that the restrictions may be enforced against you one day, so you should carefully review the agreement and get legal help in understanding it before you sign it. If you leave your job and then get sued for allegedly breaching the agreement, the costs in defending yourself, and the impact on your future plans and finances, may be very significant.
If you need assistance with restrictive covenants in Georgia, either as an employee or an employer, I invite you to contact us at The Beck Law Firm to see if we can be of help. You can reach us at 678-344-5342 and find more online at thebeckfirm.com.
You can read the Court of Appeals opinion here.