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The question has been raised:  What is the effective date of Georgia’s new non-compete statute, O.C.G.A. § 13-8-50 et seq.?

This Act shall become effective on the day following the ratification at the time of the 2010 general election of an amendment to the Constitution of Georgia providing for the enforcement of covenants in commercial contracts that limit competition and shall apply to contracts entered into on and after such date and shall not apply in actions determining the enforceability of restrictive covenants entered into before such date. If such amendment is not so ratified, then this Act shall stand automatically repealed.

Georgia’s electorate ratified Amendment 1 - the Constitutional amendment that enables the changes to Georgia’s restrictive covenant law - with 67.6% of the cast ballots. 

Article X, Section I, Paragraph VI of the Georgia Constitution, however, provides that amendments become effective on January 1 following an election “[u]nless the amendment or the new Constitution itself or the resolution proposing the amendment or the new Constitution shall provide otherwise.”  The enabling amendment and the resolution proposing the amendment are silent as to the effective date. 

Hence, already there is debate as to when the amendment will take effect. 

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What does the new law do?  Although the changes are extensive, and the effect of those changes will differ depending on the circumstances, we reviewed the statute when it was passed in 2009 and published an overview in the Georgia Bar Journal.   We also published a technology article, focusing on its effects on technology companies.  

As we noted yesterday, not all agreements need to be rewritten as the statute is not retroactive, but given that many agreements are unenforceable as written under the common law, the new law provides a new opportunity to conform agreements.  

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On November 2, Georgians voted overwhelmingly in favor of updating Georgia's restrictive covenant law. The new law is codified at O.C.G.A. 13-8-50 et seq. 

The law is not retroactive, so it does not affect existing contracts.  However, for many businesses who have learned that their agreements are not enforceable under Georgia law as it existed previously, now is the time to review the statute and consider updating the agreements.  The law affects not only employer-employee agreements but also franchisor-franchisee, distributorship, lease, partnership and employer-employer agreements.  

In the law, Georgia also adds blue-penciling to the mix for the first time for many agreements (previously, the courts would blue pencil in the instance of sale of business and in some cases partnership agreements, but the blue pencil was not applied uniformly).  

This is a new day in Georgia and there will be much to be watched, written, and learned about the new law and courts' interpretations of the statutory language in the next few months.  Stay tuned.  

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