Specific Contracts

Question 1

An employer/employee can be subject to covenant not to compete only if while employed the employee …

Answer 1

• Customarily and regularly solicited customers or prospective customers
• Customarily and regularly engaged in sales or orders or contract/services
• Performed managerial duties or
• Performed duties of a key employee or professional

Question 2

Covenants not to Compete must be between …

Answer 2

Parties listed in the statute:

-Employer/Employee
-Distributor/Manufacturer
-Lessor/Lessee
-Partnership/Partner
-Franchisor/Franchisee
-Seller/Buyer of Business

Question 3

What restrictions apply during business relationships?

Covenants not to Compete

Answer 3

• There can be a restriction on competition during a business relationship even if it lacks specific limits on scope, duration or geographic area.
• Must be written to deter potential conflict of interest or promote purpose/subject matter of agreement

Question 4

What restrictions apply after business relationships?

Covenants not to Compete

Answer 4

After business relationships, covenants not to compete may be enforced if it is reasonable in duration, geographic area and scope of prohibited activities.

Question 5

After business relationships, what is a reasonable durational restriction?

Employment relationship
Owner or seller of business
Other relationships

Answer 5

Employment relationship:
- Restriction on competition for less than two years is reasonable; anything more is unreasonable

Owner or seller of business:
- Restriction on competition for no more than 5 years is reasonable or the time period during which payments are made to the seller

Other relationships:
- Restriction on competition for no more than 3 years after the business r’ship ends

Question 6

What restrictions on geographic scope are reasonable for covenants not to compete?

Answer 6

If it includes areas where employer does business at any time during the parties’ relationship - total area is reasonable

Lists specific competitors the employee is prohibited from working for

Question 7

What scope of activities are reasonable for covenants not to compete?

Answer 7

Scope of competition is measured by the type of business of the employer based on good faith estimate

Question 8

What may Georgia courts do if there is offending language in a covenant not to compete?

Answer 8

Strike the offending language and preserve the remainder of the provision.