Georgia’s Blue Penciling Statute is Interpreted by Courts

Georgia’s Blue Penciling Statute is Interpreted by Courts

Late last fall, the Northern District of Georgia issued the first-ever published decision interpreting how a Georgia court may modify a non-compete provision that is overly broad in Lifebrite Labs v. Cooksey. Courts were given this authority back in 2011 when the state legislature passed the Non-Compete Statute, O.C.G.A. 13-8-51, commonly referred to as the “blue penciling” statute.

 

Non-Compete Statute

When Georgia’s legislature passed the Non-Compete Statute in the Spring of 2011, it gave courts for the first time, in the specific context of an employer-employee agreement, the discretion to modify a contract that is otherwise void and unenforceable. A modification was allowed as long as it did not render the agreement more restrictive as to the employee than how it was originally drafted by the parties to the covenant. Before 2011 Georgia courts refused to modify overbroad and restrictive agreements. Consequently, if one portion of a non-compete was unenforceable then the contract was unenforceable including any non-solicitation of customers provision within the same agreement.

 

Lifebrite v. Cooksey

In Lifebrite, Ms. Cooksey was a sales representative who was hired to sell toxicology tests to medical practices. Shortly after being hired, Ms. Cooksey and Lifebrite signed an employment agreement that kept her from soliciting others for one year after employment. After working for Lifebrite for only a few months, Ms. Cooksey accepted an offer from a competitor and that lawsuit was filed shortly thereafter.

The court acknowledged that non-compete and non-solicitation clauses are viewed differently under Georgia law. Non-compete clauses are typically enforceable as long as they are reasonable in time, geographic area, and scope. The court noted the covenant had no express geographic area and recognized its discretion to modify the non-solicitation covenant portion because it was found to be overbroad. In making its determination, the court analyzed the state’s pre-statute law in a sale-of-business context. The court found that modify meant striking unreasonable restrictions it did not allow a court to rewrite contracts by supplying new and material terms, such as geographical location, into the agreement.

If you or someone you know has signed an employment agreement that contains a non-compete or non-solicitation clause that may be unenforceable, contact a knowledgeable Georgia employment law attorney right away.

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