Prior to the enactment of Georgia’s Restrictive Covenant Act (“RCA”) in May 2011, Georgia courts uniformly held void and unenforceable “in any capacity” non-compete provisions in the employer-employee context. “In any capacity” non-competes are those provisions that prohibit an employee from working for a competitor in any capacity and not limited to the types of duties that the employee performed for his current employer. And under Georgia’s prior common law, a court was not allowed to revise an otherwise void and unenforceable provision to render it enforceable.
Under the RCA, however, the court is expressly allowed -- but not required -- to “modify” an overbroad non-compete to render it enforceable. There have been some cases since the enactment of the RCA that have attempted to define what “modify” means under the RCA.
With this backdrop, in mid-December 2022, in Amspec, LLC v. Calhoun et al, a federal court in the Southern District of Georgia addressed a non-compete provision which stated, among other things, that the employee could not, “as an employee, employer, owner, operator ...” work for “an entity engaged in the same or similar business as AmSpec ...” where he “contribute[d] his knowledge” to that competitive company.
After a lengthy discussion of what “contributing his knowledge” meant, the court moved to “the janitor rule,” i.e., the employee’s argument that the provision, as drafted, prohibits the employee “from working in any capacity [for a competitor] ... even if the work is not competitive with [Amspec’s] business – including, for example, working as a secretary or janitor.” The court agreed that it was an “in any capacity” non-compete.
Relying on a 2022 Georgia Court of Appeals decision, Burbach v. Motorsports of Conyers, LLC, the AmSpec court then held that “in any capacity” non-compete provisions are void and unenforceable. The court then exercised its discretion to decline to modify the agreement to make it enforceable. In doing so, it reasoned that AmSpec did not offer a more narrow interpretation of the non-compete that would narrow it to prohibit the employee from performing similar services to those he performed on behalf of AmSpec and, thus, it would not offer more narrow language for Amspec.
It is worth noting that the Burbach court (on which the Amspec court relied), in reaching its decision, adhered to Georgia common law that preceded the RCA’s enactment. It is also worth noting that on December 20, 2022, the Georgia Supreme Court agreed to hear an appeal of the Burbach decision.
Bottom Line: Under Amspec and Burbach – at least while it is being appealed – companies would be wise to review their Georgia restrictive covenant agreements and ensure that any non-compete provisions contain, among other things, a limitation on the types of duties that an employee is prohibited from performing on behalf of a competitor.
Jeff Mokotoff is Co-Chair of FordHarrison’s Non-Compete, Trade Secrets and Business Litigation practice group. If you have any questions regarding this decision, please feel free to contact Jeff at jmokotoff@fordharrison.com. Of course, you can also contact the FordHarrison attorney with whom you usually work.