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Why Noncompetes Should Be a Thing of the Past

In a nation that prides itself on a “free market” system, noncompete agreements have become a way for employers to use the law to prevent fair and open competition. These contracts legally ban employees from working for their company’s competitors for up to two years after their employment ends – even if the employee is unjustly fired or laid off.

These noncompetes have had severely detrimental effects on both the individuals constrained by the agreements and the economy at large. For the employees, a noncompete can be a wholesale ban on starting a new business or taking a job in one’s chosen career field for up to two years. That can be economically devastating. And when employees who have signed noncompetes do find new jobs, the noncompete agreements suppress wages. They have become so pervasive that often an employee’s only option is to look for work in a new field, where their lack of experience means they must “start over” at a lower-level position and work their way back up.

Noncompetes also hurt companies looking to hire, especially small businesses. Potential employers find themselves hamstrung and unable to hire their preferred talent, and new businesses are curtailed before they can even begin. 

                Finding that banning noncompete agreements “could increase wages by nearly $300 billion per year and expand career opportunities for about 30 million Americans,” the Federal Trade Commission has proposed a new rule that would ban employers from using noncompetes.

                This rule would have massive positive impacts across the employment sphere. No longer could employers exploit their laborers by trapping them in oppressive noncompetes. Employees will be free to shop around for best offers and take their talents where they will be respected the most. And former employees looking to start new businesses will be legally free to take on entrepreneurship.

                But, before we celebrate too early, let’s break down Georgia noncompete law.

What is a Noncompete?

                Under Georgia law, U.C.G.A. § 13-8-53, a noncompete is a restrictive agreement that prevents employees from entering into subsequent employment with a similar employer “so long as such restrictions are reasonable in time, geographic area, and scope of prohibited activities.” Typically, restrictions limiting their reach to one year, including the geographic territory where the employer does business, and precluding the employee from performing the same or similar services, will be found reasonable by the courts. Kennedy v. Shave Barber Co., 348 Ga. App. 298 (2018).

                Employers almost always present noncompete agreements as non-negotiable and as a condition of employment. If the employee does not sign a noncompete, the employer will reject their job application and hire someone willing to sign the noncompete. If an employer presents a non-compete to its current employees, it can fire them for refusing to sign it. Most people lack the financial stability to turn down a job over a noncompete agreement. And even if they could, rejecting a job over a noncompete is often futile because these agreements have become so prevalent in some industries, it can be almost impossible to find a job that doesn’t require one.

Who do Noncompetes Affect?

U.C.G.A. § 13-8-53 also spells out what kinds of employee can be constrained by a noncompete. Essentially there are four kinds of employee who are covered under the statute:

  1. Employees who solicit customers.
  2. Sales workers.
  3. Management level employees.
  4. “Key” employees (those who have gained a high level of influence or notoriety within an organization) or professionals (employees with advanced skills or knowledge within a specialized intellectual field).

So, as written, Georgia’s noncompete statute can cover a vast number of employees. That being said, Courts are not willing to fit every employee into these neat categories. In Blair v. Pantera Enterprises, Inc., 349 Ga. App. 846 (2019), the Georgia Court of Appeals decided that key employees with high levels of influence or notoriety must be gained from the employer’s investment of time, money, skill, etc. Therefore, Blair (a backhoe operator), who had developed his skills prior to coming to his employer, could not be a key employee.

Can I Escape a Noncompete if I’ve Signed One?

In Georgia, noncompetes are very difficult to escape. In large part, this has to do with the Courts’ statutory ability to “blue-pencil” or edit a noncompete if an employee challenges its legality. Traditionally, blue-pencilling was used to strike offending, illegal, or unenforceable provisions of contracts. However, some courts are using their “blue pencil” to edit provisions, limiting too-long temporal provisions, or adding in a geographic provision where one did not previously exist. See Kennedy. This leads to significant uncertainty in the litigation of noncompetes. But overall, the Courts’ freedom to “blue pencil” disputed noncompetes gives employers even greater leverage over their employees, because employees who’ve signed noncompetes are very unlikely to fully escape them via litigation; the employee’s best likely outcome is just that the Court will reduce the noncompete’s severity and then enforce it anyway. This  incentivizes companies to draft even broader, more restrictive agreements, since the company knows a Court will almost always deem at least some portion of the agreement valid.

What will the FTC’s Rule do to Noncompetes?

If the FTC’s rule passes, then it will be illegal to enter a noncompete with an employee, maintain a noncompete with an employee, or even represent that an employee is subject to a noncompete. The rule will apply to all workers, including independent contractors and unpaid interns. It will require employers to rescind existing noncompetes and inform all employees that their prior noncompetes are no longer in effect. Basically, the rule will completely eviscerate noncompetes and allow employees to freely move between employers, self-employment, and any other style of employment they can find.

The Rule is currently subject to a “Notice and Comment” period, meaning the public can comment on the rule, sharing their opinion on whether it should be passed in its current form. Here at Legare, Attwood & Ragan, we support the FTC’s efforts to curb the use of noncompetes.

If you believe you are being subjected to an unenforceable noncompete, please reach out to the attorneys at Legare, Attwood & Ragan.

Legare, Attwood & Ragan specializes in representing employees who have suffered civil rights violations, including racial discrimination, gender discrimination (including pregnancy, sexual harassment, sexual orientation and transgender discrimination), religious discrimination, national origin discrimination, disability discrimination, as well as those who have Family Medical Leave Act claims, overtime and job misclassification claims, harassment, and breach of contract or wrongful termination claims.  If you want more information about your unique situation, we’ll be glad to see if we can help.  (470) 823-4000 | law-llc.com

Authored by: Missy Torgerson

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