In the November 2, 2010 general election, Georgia voters approved an amendment to the Georgia Constitution that goes into effect as of November 3, 2010. With the approval of Amendment One, House Bill 173 (“H.B. 173”) is officially enacted. H.B. 173 brings a significant change to the drafting and enforcement of restrictive covenants, including those within employment agreements (non-compete agreements). Rather than being limited by existing case precedent, Georgia courts will now have significantly more latitude in how these agreements may be enforced. Consequently, employers should have an easier time having such restrictions enforced. The time is ripe for employers to review their existing employment agreements and consider revisions that are consistent with the new law.

In the run-up to the November 2, 2010 election, H.B. 173 was the subject of vigorous debate between employers, employee organizations, and attorneys. The new law imposes a radical change in the manner in which employment agreements will be reviewed and enforced by the Georgia courts. Georgia has typically been viewed as somewhat hostile towards the enforcement of non-compete agreements. Of the 47 states that allow restrictive covenants in employment agreements, Georgia was one of only four states that did not permit any form of judicial modification of a covenant that may have overstepped the limitations imposed under the Georgia Constitution. Under prior law, Georgia employers were significantly limited in the duration, scope of prohibited activities and geographic areas in which any post-employment covenants would be enforced. Georgia courts implied a strict scrutiny standard of review in determining their reasonableness. If the covenants were found to be unlawful, they were stricken in their entirety. Under the new law, Georgia courts will now be allowed to modify (“blue-pencil”) restrictive covenants that may be overly broad.