Recently, in the case of North American Senior Benefits, LLC v. Wimmer, two insurance agents left their original employer and started up their own competing business together. Soon afterward, they were sued by their former employer, who cited that they violated their restrictive covenants. Then, the Georgia Court of Appeals made the decision that the employee non-recruitment covenants were unenforceable by the once-employer. This sent shockwaves through businesses in the state and created a new legal precedent that will help employees in Georgia for years to come.
But based on that summary, we wouldn’t blame you if you’re confused as to what this is all about. When talking to clients and the general public, there are legal terms that have different names that are easier to understand than what they’re referred to as in court. Employee non-recruitment covenants and restrictive covenants are an example of this.
If you have never heard of these terms, and are unsure why this case is good news for workers in the state of Georgia, the employment law attorneys at Barrett & Farahany can explain.
What are Employee Non-Recruitment Covenants?
Employee non-recruitment covenants are non-compete contracts/clauses, just by another name. When your employer has you sign a contract or clause stating that you won’t work for or start a competing business, this is usually called a non-compete, which is a type of restrictive covenant. In the courtroom, some may call it an employee non-recruitment covenant, because this is technically more accurate to what the contract/clause does.
What Does This Decision Mean?
This decision is similar to those of other countries across the country, believing that employee non-recruitment covenants (or non-compete agreements as they’re better known) are untenable. While this decision doesn’t go so far, it does require that covenants designate a “territory” for which employees can’t compete with them. This means there must be a stated physical location that doesn’t keep employees from being unable to work.
For example, if you worked for a barbershop in a borough of Atlanta, and signed a non-compete agreement, the agreement must state that you’re agreeing not to work for another barbershop in that borough of Atlanta.
It’s also important to note that this case doesn’t dive into what is a reasonable territory, and leaves room for more scrutiny in future cases. For instance, if the covenant had asked you not to work in a barbershop in the city of Atlanta, this could arguably be an unrealistic requirement.
How Will This New Decision Affect Employees in Georgia?
Employee non-recruitment covenants demand that employees not work or create a competitor in the same marketplace. This is ignoring the fact that more often than not, the employee would be unable to work anywhere else without uprooting their entire life. This removes the power of these covenants to force this unfair expectation on employees.
This is not just for future employee non-recruitment covenants but affects previous ones in the state of Georgia. Now, any covenant that failed to state a clear territory where the employer couldn’t work for a competitor isn’t as enforceable as employers thought.
What Should You Do if You’re Accused of Breaking an Employee Non-Recruitment Covenant?
Before you even sign your employment agreement, you should have an employment law attorney review it. The attorneys at Barrett & Farahany can explain to you how enforceable each restrictive covenant is in your contract. This comes with the warning that even if your employer knows their covenant isn’t strong, they may still file a lawsuit against you.
They likely believe that they can ruin you with the cost of legal fees even if they can’t definitely win the court case. You need an attorney who will stand at your side to defend you in court, and even help you countersue for the damages.
You do not have to abide by their covenants and hamstring your own career. Contact us to talk to one of our employment law attorneys for help.
