Restrictive Covenants / Confidential Information / Trade Secrets

As part of Martin & Martin’s Small Business Employment Law Practice, attorneys Tom Martin and Kimberly Martin draft restrictive covenants to help shield their small business clients from unfair competition, improper solicitation, and disclosure of confidential and trade secret information. Additionally, through the firm’s Georgia In House Counsel division small business owners along with their management, human resources, and supervisory personnel, can participate in employment law training. This includes the firm’s course, “Restrictive Covenants & Trade Secrets (Noncompetes, Nonsolicitation, and Nondisclosures),” during which the firm provides the participants with sample restrictive covenants agreements and one-on-one attorney time to customize the agreements to best protect the participant’s business.

Pursuant to the Georgia Restrictive Covenants Act (O.C.G.A. § 13-8-50 et seq.), Georgia businesses may require some employees to sign an agreement with provisions which protect the employer’s business, including restrictive covenants which protect the employer from competition (noncompete agreements) and solicitation of employees and customers (nonsolicitation agreements). Georgia businesses can also protect their confidential and trade secret information and documents through nondisclosure agreements.

In Georgia, in order for a noncompete agreement to be enforceable, it must meet certain criteria including:

1. Supported by adequate consideration;
2. Identification of a legitimate business interest worthy of protection;
3. Reasonable in duration of time;
4. Reasonable in geographic location;
5. Reasonable in the scope of the prohibited activities; and
6. Limited to certain employees.

Georgia is a “blue pencil” state meaning that any provision that does not meet the criteria above may be rewritten by the court to make it enforceable except where the restrictive covenants are contained in an employment agreement. In that case, the court will strike down both the noncompete and nonsolicitation if either is found unenforceable. Georgia is also an at-will employment state meaning that an offer of employment or continued employment is adequate consideration for restrictive covenant agreements. Legitimate business interests include protection of confidential information, trade secrets, specialized training, or substantial relationships with clients or customers. Courts have found two years to be a reasonable time restriction. Some unique cases may require a lengthier period of time.

The geographic range and scope of prohibited activities are not as well defined by the Act and the determination of enforceability relies heavily on the specific facts of the employment relationship. A reasonable geographic area is presumed where it is limited to the area in which the employee provided services to the employer. Georgia courts also examine the interplay between the geographic range and scope of prohibited activities. When one provision is quite broad, the other provision must be quite limited. For example, a geographic scope covering multiple states may be permissible if the scope of the prohibited activities is limited to only prohibiting the employee from working for customers of the company with whom the employee actually engaged with on a regular basis. Whether the geographic range and scope of activities are permissible can be a bit nuanced and require experienced noncompete attorneys to assist in drafting a valid noncompete agreement.

The Georgia Restrictive Covenants Act only permits agreements with five categories of employees, which include employees:

1. Who customarily and regularly solicit customers;
2. Who regularly make sales or take orders or contracts;
3. Whose primary duty is managing the business (directing the work of employees, having hire/fire authority, make recommendations of particular weight regarding employment decisions) and supervising two or more employees;
4. Who are “key employees;” or
5. Who are “professional employees.”

The Georgia Restrictive Covenants Act defines “key employee” as:

1. An employee who, by reason of the employer’s investment of time, training, money, trust, exposure to the public, or exposure to customers, vendors, or other business relationships during the course of the employee’s employment with the employer, has gained a high level of notoriety, fame, reputation, or public persona as the employer’s representative or spokesperson; or has gained a high level of influence or credibility with customer’s vendors, or other business relationships; or is intimately involved in the planning or direction of the business; and
2. Is in possession of selective or specialized skills, learning, or abilities or customer contacts or customer information who has obtained such skills, learning, abilities, contacts, or information by reason of having worked for the employer.

The Georgia Restrictive Covenants Act defines a “professional employee” as one who has a primary duty the performance of the work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction or requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.

1. What type of agreement contains the restrictive covenant provisions, e.g., within an employment agreement, as a separate standalone agreement, etc.?
2. What are the legitimate business interests that require the restrictive covenants?
3. What is a reasonable time period that is required to protect the legitimate business interests?
4. What is a reasonable geographic area limitation that would protect the legitimate business interests?
5. What is a reasonable prohibition of activities that is necessary to protect the legitimate business interests?
6. Which of the five categories of workers does the employee fall?

Georgia law also permits employers to require employees to sign nonsolicitation agreements which prohibit the solicitation of customers and/or employees. Under Georgia law, a nonsolicitation agreement does not have to be geographically limited where it is restricted to only those customers with whom the employee had “material contact.” A nonsolicitation agreement may also limit employees from pirating other employees to leave the company. The key to a nonsolicitation agreement is that the departing employee cannot “solicit” customers to transfer their business or “solicit” employees to transfer their employment. However, absent noncompete agreements, other employees and customers are free to follow a departing employee to their new employment absent solicitation by the departing employee.

A nondisclosure agreement limits the right of a former employee to disclose or use the employer’s confidential information which they gained while employed. Georgia’s law defines confidential information broadly to include information that is not generally known to the public, including trade secrets, methods of operation, names of customers, price lists, financial information and projections, route books, personnel data, etc. The law does not require that the nondisclosure contain a time limit. It permits the nondisclosure of the confidential information to last as long as the information remains confidential or a trade secret. There are also Georgia and federal trade secrets acts that protect trade secrets even in the absence of a nondisclosure agreement.

Georgia restrictive covenant attorneys, Tom Martin and Kimberly Martin, understand the value of protecting a small business from competition, solicitation of employees and customers, and disclosure of confidential information and trade secrets. Prior to becoming an attorney, Tom Martin, spent 28 years in senior management positions of hospital corporations while employment law attorney, Kimberly Martin, spent five years at national and international law firms representing large corporations in all areas of employment law, including drafting restrictive covenants and litigating them when they were breached. Tom and Kimberly strongly believe that small businesses are entitled to the same sound legal advice they would receive from a large law firm, but at reasonable hourly rates and monthly retainer fees. They are passionate about providing their small business clients with a real-world game-plan to protect them from future litigation so their clients can focus on successfully running their business. They do this through a variety of means, including training for small business owners, and management, human resources, and supervisory personnel that includes sample documents, agreements, and policies.

If you are a small business, Tom and Kimberly welcome you to contact them directly. They look forward to hearing from you. If you would like a free copy of Martin & Martin’s Quick Reference Guide to Georgia and Federal Employment Laws, please Contact the firm.

Tom Martin
Email: tfmartinlaw@msn.com
Cell: 770.344.7267

Kimberly Martin
Email: kimberlymartinlaw@gmail.com
Cell: 404.313.5538