Georgia's New Non-Compete Law Hits a Legal Roadblock

Back in 1990, the Georgia state legislature tried to repair the state's reputation for having a business-chilling stance on non-compete and non-solicitation agreements. That year the Georgia General Assembly passed a law designed to make it more feasible for companies to protect their trade secrets and business from employees who depart to join a competitor or to start their own competing business.

But that law did not remain on the books for long. In 1991 the Georgia Supreme Court struck down the statute. The court found that the state constitution bars any legislation that enhances the enforceability of post-employment restrictive covenants.

But yet another complication soon emerged. The legislation that enabled the ballot question did not have an effective date specified, meaning it would go into effect on Jan. 1. Initial guidance from several law firms called for clients to wait until after Jan. 1 to introduce new non-compete and non-solicitation agreements.

Then the plot thickened even more. Some lawyers who analyzed the effective date issue pointed to a section of the Georgia Constitution that states that the constitutionality of a new law "is to be determined by the constitution in effect on the date the law became effective" and "if it is unconstitutional then, it is forever void." That led to the conclusion that the new non-compete law was "forever void" because the constitutional amendment that made it possible was not in effect on the date the law became effective.

Senior Editor

Mary Swanton

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