Just before the end of 2008, Georgia’s House Study Committee on Restrictive Covenants in the Commercia Arena, chaired by Representative Kevin Levitas, issued its final report, asking for support to “[m]oderniz[e] Georgia law” and to “attract new business to our great state and retain those companies that are already located here.”
Following two hearings involving testimony and letters from a number of witnesses (in full disclosure, I participated in providing testimony), the Committee concluded that “[t]he time has come for a change in Georgia law, both to bring our state in line with the overwhelming majority of other states as well as to establish a rule of reasonableness in the analysis of restrictive covenants.”
Additionally, the Committee recommended that Georgia courts be allowed to “blue pencil” restrictive covenants in connection with employment agreements (blue-pencling in connection with agreements relating to sale of a business already is allowed). A couple of practitioners who testified before the Committee expressed concern that blue-penciling would make it more difficult to predict outcomes; that is that there is no certainty until the litigation concludes. Proponents of blue-penciling countered that argument by noting that blue-penciling may lead to more negotiated settlements of disputes.
It appears that the legislation may be headed for a hearing this session. The question that remains is whether a constitutional amendment will be required. Previous attempts by the General Assembly to bring clarity to Georgia’s law were struck down by Georgia’s Supreme Court as violating Art. III, Sec. VI, Par. V(c) of the Constitution of Georgia of 1983, which reads: “The General Assembly shall not have the power to authorize any contract or agreement which may have the effect of or which is intended to have the effect of defeating or lessening competition, or encouraging a monopoly, which are hereby declared to be unlawful and void.” So, in addition to making it through the General Assembly, we may also see support for a constitutional amendment to avoid uncertainty in the Georgia’s courts.