Title 13, Chapter 8, Section 2.1
( 13-8-2.1)
(a) Contracts that restrain in a reasonable manner any party thereto
from exercising any trade, business, or employment are contracts in
partial restraint of trade and shall not be considered against the
policy of the law, and such partial restraints, so long as otherwise
lawful, shall be enforceable for all purposes. Without limiting the
generality of the foregoing, contracts of the type described in
subsections (b) through (d) of this Code section are considered to
be reasonable. (b)(1) As used in this subsection, the term: (A) "Affiliate" means: (i) a person or entity that directly, or
indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a specified person
or entity; (ii) any entity of which a specified person is an
officer, director, or partner or holds an equity interest or
ownership position that accounts for 25 percent or more of the
voting or profits interest of such entity; (iii) any trust or
other estate in which the specified person or entity has a
beneficial interest of 25 percent or more or as to which such
person or entity serves as trustee or in a similar fiduciary
capacity; and (iv) the spouse, lineal ancestors, lineal
descendants, and siblings of the specified person, as well as
their spouses. (B) "Business" means any line of trade or business involved in a
sale. (C) "Buyer" means any person or entity, including any
successor-in-interest to such an entity, that acquires a
business or a controlling interest in a business. (D) "Controlling interest" means any equity interest or
ownership participation held by a person or entity with respect
to a business: (i) which accounts for 25 percent or more of the
voting or profits interest of the business prior to the sale,
alone or in combination with the interest or participation held
by affiliates of such person or entity; or (ii) the sale of
which results in the owner thereof receiving consideration worth
at least $500,000.00, inclusive of any consideration received
for the sale of business covenant. (E) "Sale" means any sale or transfer of the good will or
substantially all of the assets of a business or any sale or
transfer of a controlling interest in a business, whether by
sale, exchange, redemption, merger, or otherwise. (F) "Sale of business covenant" means any agreement described in
paragraph (2) of this subsection or any substantially equivalent
agreement. (G) "Seller" means any person or entity, including any
successor-in-interest to such an entity, that is: (i) an owner
of a controlling interest; (ii) an executive employee, officer,
or manager of the business who receives, as a minimum,
consideration in connection with either the sale or the sale of
business covenant that is worth the equivalent of such person's
most recent annual base salary or is in the form of a commitment
of continued employment for a period of at least one year; or
(iii) an affiliate of a person or entity described in division
(i) of this subparagraph; provided, however, that each sale of
business covenant shall be binding only on the person or entity
entering into such covenant, its successors-in-interest, and, if
so specified in the covenant, any entity that directly or
indirectly through one or more intermediaries is controlled by
or is under common control of such person or entity. (2) A seller may agree in writing for the benefit of a buyer to
refrain from: (A) Carrying on or engaging in any activity competitive with the
business; or (B) Soliciting or accepting business from the business's
customers which were customers at or prior to the time of the
sale, including actively sought prospective customers, for
purposes of providing products or services competitive with
those provided by the business within the geographic area or areas where the business conducts
its operations at the time of the sale, including any area where
the business's customers and actively sought prospective customers
are present and including any area into which the business is
reasonably expected to expand, provided that such activity,
business, and area must be described in such writing. A sale of
business covenant may, if reasonable to protect the interests of
the buyer or the good will of the business, be worldwide. A sale
of business covenant may extend for any period of time that is
reasonable to protect the interests of the buyer or the good will
of the business. Each sale of business covenant shall, however,
be considered to terminate at the time the business is
discontinued or either the seller, including all
successors-in-interest, or the buyer, including all
successors-in-interest, ceases to exist. (c)(1) As used in this subsection, the term: (A) "Business" means any line of trade or business conducted by
an employer. (B) "Employee" means: (i) an executive employee, officer,
manager, or key employee; (ii) research and development
personnel or other persons or entities, including independent
contractors, in possession of confidential information that is
important to the business; (iii) any other person or entity,
including an independent contractor, in possession of selective
or specialized skills, learning, or abilities or customer
contacts or customer information; or (iv) any party to a
partnership agreement, franchise, distributorship, or license
agreement or sales agent, broker, representative, or supervisor.
The term "employee" shall not include, however, any employee who
lacks selective or specialized skills, learning, customer
contacts, or abilities. (C) "Employer" means any corporation, partnership,
proprietorship, or other organization, including any
successor-in-interest to such an entity, that conducts a
business or any person or entity that directly or indirectly
owns an equity interest or ownership participation in such an
entity that accounts for 50 percent or more of the voting or
profits interest of such entity. (D) "Material contact" exists between an employee and each
customer or potential customer: (i) with whom the employee
dealt; (ii) whose dealings with the employer were coordinated or
supervised by the employee; (iii) about whom the employee
obtained confidential information in the ordinary course of
business as a result of such employee's association with the
employer; or (iv) who receives products or services authorized
by the employer, the sale or provision of which results or
resulted in compensation, commissions, or earnings for the
employee within two years prior to the date of the employee's
termination. (E) "Post-employment covenant" includes any agreement described
in paragraphs (2) through (4) of this subsection or any
substantially equivalent agreement. (F) "Products or services" means anything of commercial value,
including without limitation goods; personal, real, or
intangible property; services; financial products or services;
business opportunities or assistance; or any other object or
aspect of business or the conduct thereof. (G) "Termination" means the termination of an employee's
engagement with an employer, whether with or without cause and
upon the initiative of either party, provided that any possible
inequity that results from the discharge of an employee without
cause or in violation of a contractual or other legal obligation
of the employer may be considered as a factor affecting the
choice of an appropriate remedy or, if the restraint as a whole
is rendered unreasonable, the unenforceability thereof. For
purposes of this definition, "the discharge of an employee
without cause" does not include (i) a termination of a
partnership agreement, franchise, distributorship, or license
agreement or a sales agent, broker, representative, or
supervisor agreement in accordance with the terms of the
agreement or upon the completion or expiration of the agreement,
(ii) any termination under retirement programs of the employer,
(iii) any termination that follows the employee's refusal to
accept an offer of continued employment on terms and conditions
at least as favorable to the employee as those previously in
effect, or (iv) any termination under circumstances where the
employee remains or becomes entitled to receive earnings,
commissions, or benefits that serve as compensation, at least in
part, for the employee's compliance with the post-termination
covenants. (2) An employee may agree in writing for the benefit of an
employer to refrain, for a stated period of time following
termination, from conducting activity that is competitive with the
activities the employee conducted for the employer within the
geographic area or areas where the employee conducted such
activities at or within a reasonable period of time prior to
termination, provided that such activity and area must be
described in such writing. The geographic area in which an
employee works may include any area where any operations
performed, supervised, or assisted in by the employee were
conducted and any area where customers or actively sought
prospective customers of the business with whom the employee had
material contact are present. (3) An employee may agree in writing for the benefit of an
employer to refrain, for a stated period of time following
termination, from soliciting or accepting, or attempting to
solicit or accept, directly or by assisting others, any business
from any of such business's customers, including actively sought
prospective customers, with whom the employee had material contact
during his employment for purposes of providing products or
services that are competitive with those provided by the
employer's business. No express reference to geographic area or
the types of products or services considered to be competitive
shall be required in order for the restraint to be enforceable.
Any reference to a prohibition against "soliciting or accepting
business from customers," or similar language, shall be adequate
for such purpose and narrowly construed to apply only to: (A) such
of the business's customers, including actively sought prospective
customers, with whom the employee had material contact; and (B)
products and services that are competitive with those provided by
the employer's business. (4) An employee may agree in writing for the benefit of an
employer to refrain, for a stated period of time following
termination, from recruiting or hiring, or attempting to recruit
or hire, directly or by assisting others, any other employee of
the employer or its affiliates. No express reference to
geographic area shall be required. Any reference to a prohibition
against recruiting or hiring, or attempting to recruit or hire,
other employees shall be narrowly construed to apply only to other
employees who are still actively employed by or doing business
with the employer or its affiliates at the time of the attempted
recruiting or hiring. (5) To the extent so stated in the post-employment covenant, a
post-employment covenant may provide that any violation of the
restraint shall automatically toll and suspend the period of the
restraint for the amount of time that the violation continues,
provided that the employer seeks enforcement promptly after
discovery of the violation. (6) A duration of two years or less in the case of a restraint of
the type described in paragraph (2) of this subsection, and three
years or less in the case of a restraint of the type described in
paragraphs (3) and (4) of this subsection shall be presumed to be
reasonable as the period of time stated for any post-employment
covenant. (d) Any restriction that operates during the term of an employment
agreement, agency agreement, independent contractor agreement,
partnership agreement, franchise, distributorship agreement,
license, shareholders' agreement, or other ongoing business
agreement shall not be considered unreasonable because it lacks any
specific limitation upon scope of activity, duration, or territory,
so long as it promotes or protects the purpose or subject matter of
the agreement or deters any potential conflict of interest. (e)(1) Activities, products, or services that are competitive with
the activities, products, or services of an employer may include
activities, products, or services that are the same as or similar
to the activities, products, or services of the employer.
Whenever a description of activities, products and services, or
areas is required by this Code section, any description that
provides fair notice of the maximum reasonable scope of the
restraint shall satisfy such requirement, even if the description
is generalized or could possibly be stated more narrowly to
exclude extraneous matters. (2) In the case of a post-employment covenant entered into prior
to termination, any good faith estimate of the activities,
products and services, or areas that may be applicable at the time
of termination shall also satisfy such requirement, even if such
estimate is capable of including or ultimately proves to include
extraneous activities, products and services, or areas. The
post-employment covenant shall be construed ultimately to cover
only so much of such estimate as relates to the activities
actually conducted, the products and services actually offered, or
the areas actually involved within a stated period of time prior
to termination. Activities, products, or services shall be
considered sufficiently described if a reference to the
activities, products, or services is provided and qualified by the
phrase "of the type conducted, authorized, offered, or provided
within one year prior to termination," or similar language.
Further, the phrase "the areas where the (employee) is working at
the time of (termination)" shall be considered sufficient as a
description of areas if the person or entity bound by the
restraint can reasonably determine the maximum reasonable scope of
the restraint at the time of termination. (f)(1) Whenever a person or entity desires to verify the terms of any partial restraint in effect at any time, or to obtain a clarification of a restraint believed to be unclear, such person or entity may, at its option, demand such verification or clarification by delivering to the persons or entities that benefit from such restraint a written statement that contains: (A) if verification is sought, a request for a copy of each partial restraint in effect between the parties; or (B) if clarification is sought, a description of the clarification requested; and (C) in all cases, the following statement: "THIS DEMAND IS MADE PURSUANT TO CODE SECTION 13-8-2.1(f)(2) OF THE OFFICIAL CODE OF GEORGIA ANNOTATED AND REQUIRES A RESPONSE WITHIN 30 DAYS." (2) Within 30 days after such other persons or entities or their
authorized representatives have received such demand in person,
they shall respond by sending the person or entity bound by the
restraint the requested information or, if clarification is
considered to be unnecessary because the restraint is believed to
be clear, a statement to that effect. In no event shall such a
response be required to include confidential information or
business strategies as part of any clarification. (3) In the interest of reducing or eliminating any unclear or
overbroad aspect of the restraint, the persons or entities that
benefit from any existing restraint may provide the persons or
entities bound by such restraint with a clarification or
reformulation of the restraint, whether or not the clarification
or reformulation was requested, so long as it is no broader than
the terms of the original restraint. Any clarification or
reformulation on lesser terms so provided by the persons or
entities that benefit from the restraint shall supersede any
conflicting terms of the restraint and be binding regardless of
whether additional consideration is provided. The person or
entity bound by the restraint may rely absolutely on such
clarification or reformulation in complying with the terms of such
restraint. (4) Any failure or delay of the persons or entities that benefit
from such restraint to respond to such a demand shall be
considered as one factor by a court in determining how much of an
unclear or overbroad restraint may be enforced as lawfully serving
the business purposes and interests contemplated by the parties in
their agreement. In addition, if the procedure provided for in
this subsection is followed for the benefit of anyone who wishes
to employ or do business with a person or entity, any subsequent
enforcement of any restraint that was unknown, unclear, or
overbroad but that is not properly identified, clarified, or
reformulated by the persons or entities that benefit from the
restraint following their receipt of such a demand shall be
limited so as to avoid prejudice to the employment or business to
which the unknown, unclear, or overbroad aspects of the restraint
relate. (g)(1) Every court of competent jurisdiction shall enforce through
any appropriate remedy every contract in partial restraint of
trade that is not against the policy of the law or otherwise
unlawful. In the absence of extreme hardship on the part of the
person or entity bound by such restraint, injunctive relief shall
be presumed to be an appropriate remedy for the enforcement of the
contracts described in subsections (b) through (d) of this Code
section. If any portion of such restraint is against the policy
of the law in any respect but such restraint, considered as a
whole, is not so clearly unreasonable and overreaching in its
terms as to be unconscionable, the court shall enforce so much of
such restraint as it determines by a preponderance of the evidence
to be necessary to protect the interests of the parties that
benefit from such restraint. Such a restraint shall be subject to
partial enforcement, whether or not it contains a severability or
similar clause and regardless of whether the unlawful aspects of
such restraint are facially severable from those found lawful. (2) The enforceability of any partial restraint of trade shall be
determined and shall be enforced independently of the
enforceability of any other covenant or part thereof contained in
the same contract or arrangement. (3) Contractual terms that provide for a loss or forfeiture of
rights or benefits conditioned upon any specified act or event
shall not be considered a restraint of trade. The fact that any
such loss or forfeiture provision is contained in the same
agreement or contract with an otherwise valid partial restraint of
trade shall not impair the validity or enforceability of either
such loss or forfeiture provision or such restraint, and the
enforcement of either term shall not serve as grounds for delaying
or withholding enforcement of the other term, including
enforcement by injunctive relief. If a loss or forfeiture
provision is contained in an agreement or contract that also
contains other terms that are determined to be, in some respects,
an unreasonable and unenforceable restraint of trade, such loss or
forfeiture provision shall nonetheless be enforceable to the
extent it may lawfully serve the purposes and interests of the
parties that benefit from such provision. Such a loss or
forfeiture provision shall be subject to enforcement, whether or
not it contains a severability or similar clause, and regardless
of whether the unlawful aspects of such restraint are facially
severable from those found to be unlawful. |