The Georgia Court of Appeals recently held that a covenant not to compete included in an employment agreement was unenforceable because it failed to specifically identify the post-employment activities in which the former employee could not engage.  The court ruled that another provision of the employment agreement prohibiting the employee from terminating her employment for one year was valid, however, even though the agreement also specified that her employment was at-will.  Avion Systems, Inc. v. Thompson, No. A07A1488, Georgia Court of Appeals (July 10, 2007).

Factual Background

On July 21, 2003, Maxine Thompson entered into an employment agreement to provide consulting services to Avion Systems, Inc. The agreement stated that Thompson was an at-will employee, that she would provide her services for at least 12 months, and that for a period of 12 months after her project was completed she would not work with any company client “for any pecuniary gain” if she had contact with that client through her employment with Avion.

Less than three months later, Thompson notified Avion that she was terminating her employment and would be working at her current assignment through another contractor. Avion sued claiming that Thompson breached the covenant to provide services for one year and the covenant not to compete. The trial judge dismissed the suit and Avion appealed.

Legal Analysis

Thompson claimed that her agreement to provide services for 12 months was invalid and also conflicted with the general provision for at-will employment in the agreement’s introductory paragraph. Given this ambiguity, Thompson argued, the agreement should be construed to provide for purely at-will employment.  The Georgia Court of Appeals disagreed, finding that a provision in a contract that specifically addresses an issue prevails over conflicting language. According to the court, while Thompson’s employment was generally at will, it was subject to her agreement to provide consulting services to Avion for at least 12 months. Furthermore, the court rejected Thompson’s argument that the lack of reciprocity in the agreement rendered it invalid. According to the court, the fact that Thompson agreed to restrictions not placed on her employer did not divest the contract of mutuality.

The court of appeals then turned to Avion’s argument that Thompson breached the agreement by continuing to work at the job site to which Avion had assigned her. According to the court, since covenants not to compete in employment agreements are a “restraint of trade,” they are upheld only when strictly limited. Specifically, a covenant against competition, which does not specify the nature of the business activities in which the employee may not engage, is considered unreasonable because it is overbroad. In this case, the non-compete provision prohibited Thompson from dealing with a client “for any pecuniary gain” without regard to whether her activities were related to Avion’s business. The court therefore concluded that the provision was overbroad and unenforceable. As a result, the court ruled that Thompson was entitled to partial dismissal of Avion’s claim that she breached their agreement.

Practical Impact

According to Joseph Bryan, a shareholder in Ogletree Deakins’ Atlanta office: “The Georgia courts are among the quickest to strike down restrictive covenants.  Unlike the courts of many other states, the Georgia courts will not enforce an overly broad restrictive covenant to the extent the court deems the restriction reasonable.  If it is overly broad in any respect, it will not be enforced.  The scope of the restriction must be reasonably related to the duties performed by the former employee during his or her employment by the employer.  For example, a prohibition of employment by a customer or competitor ‘in any capacity,’ will not be enforced.  Consequently, such agreements need to be prepared on an individual basis if they are to survive scrutiny by the Georgia courts.”

Note: This article was published in the September 2007 issue of the Georgia eAuthority.

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