Noncompete News: Uncertainty Remains Regarding Georgia Noncompete Laws

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On November 3, 2010, Georgia voters approved a constitutional amendment giving effect to the Georgia Restrictive Covenants Act ("RCA"). What we do know is that the RCA constitutes a monumental change to existing Georgia "noncompete" law. What we do not know is when the RCA will take effect.

Under the Georgia Constitution, Art. X, §1, ¶6, a constitutional amendment becomes effective on the January 1st following its ratification, unless the amendment provides otherwise. The amendment was silent, so the constitutional amendment (and thus the RCA) presumably went into effect January 1, 2011. Nevertheless, many practitioners believed the RCA to be effective as of November 3, 2010. To address this discrepancy (i.e., when the RCA takes effect), the Georgia legislature recently presented House Bill 30. On Tuesday, February 22, 2011, the House of Representatives passed HB 30. The bill is now before the Senate. If HB 30 is passed, however, there may be an argument that the RCA does not become effective until HB 30 goes into effect. Accordingly, some practitioners have adopted a "wait and see" approach to applying the RCA. Because of this uncertainty, many practitioners who draft and litigate Georgia noncompete agreements continue to adhere to the "old" law with an eye toward interpreting and understanding the RCA, if and when it becomes effective.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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