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Non-Compete and Trade Secrets Blog

Posts tagged severability.

Twas the night before Christmas, when all through the company; A disgruntled employee kept saying “please jump with me.” She was trying to line up a grand, mass departure; Of which she was certain no one could outsmart her.

Does your company have employees located in multiple jurisdictions across the United States? Are you concerned that your restrictive covenants are not enforceable in all of these jurisdictions? If so, you're not alone.  Multistate employers need to consider the dangers of “one-size-fits-all” covenants.  The Association of Corporate Counsel's Docket just published a detailed article addressing this very question.  Click here to learn how to navigate the analysis required to ensure your covenants will hold up in a multistate environment.

Many companies have employees located in states across the country. Drafting restrictive covenants for employees in all of these locations can be a daunting task. Some companies opt for a one-size-fits-all approach, but here is an alternative.

For companies with employees in multiple jurisdictions, creating a single non-compete agreement for use by employees throughout the country can be tempting, yet potentially ineffective. The following issues may vary from state to state and should be considered when determining how many agreements a company needs and how to maximize the prospect for enforcement.

The manner in which courts treat overly broad non-compete agreements varies from state to state. A poorly worded severability clause can mean the difference between enforcement and invalidation of an agreement.

On May 11, 2011, Governor Deal signed House Bill 30, Georgia’s Restrictive Covenant Act. The upshot of the signing of the legislation is that a new day has dawned in Georgia for restrictive covenants signed on or after May 11, 2011.

Settlement of lawsuits is almost universally considered a good thing because, among other things, the parties are able to end their dispute immediately. But some cases suggest that settlement might simply postpone the battle until another day. According to these courts, this is true because restrictive covenants in settlement agreements are subject to the same strict judicial scrutiny applied to employment agreement covenants. Consequently, if an employee violates a covenant contained in a settlement agreement, the parties might find themselves back in court litigating the same issues they thought they had settled.

In a landslide victory with 68% of the votes, the constitutional amendment authorizing a new statutory framework for enforcement of restrictive covenants in Georgia was passed by Georgia voters on November 2, 2010. The new framework goes into effect immediately, but it will only be applied to restrictive covenants that are signed November 3, 2010 or thereafter.

In a state that is otherwise generally recognized as being “employer friendly,” Georgia law has long been known for its “unfriendliness” towards non-competes and other post-employment restrictive covenants. However, a radical shift in that law is on the horizon – and the fate of the sea change actually resides in the hands of Georgia voters.

Many employers with offices or employees located in multiple states use the same non-compete/confidentiality agreement in each state in which they do business. Typically, the form of the non-compete/confidentiality agreement originated in the employer’s home state, and the employer went on to use this same agreement wherever the employer does business. However, these employers may find out too late that a non-compete/confidentiality agreement enforceable in their home state may not be enforceable in another state.

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