U.S. 11th Circuit Court of Appeals Takes a Stab at Clarifying Effective Date of Georgia’s New Law Regarding Restrictive Covenants

I have posted several articles discussing Georgia’s confusing efforts to codify its laws governing restrictive covenants such as noncompetes, nonsolicitation agreements and nondisclosure agreements that have now resulted in three different sets of rules governing restrictive covenants.  (The determination of which set of rules to apply depends on the date the agreement was signed.)  My previous posts are located here  and here and here and here.  The confusion has even extended to the effective dates of the changes in the law.  Now the 11th Circuit U.S. Court of Appeals has waded into the muck to try to bring some clarity, at least as to the issue of the effective date of one of the changes in the law.

Here is what we know.

There is general agreement among attorneys who practice in this area of the law that Georgia’s long line of court decisions interpreting restrictive covenant agreements governs agreements that were signed before  Georgia’s voters adopted a constitutional amendment pertaining to restrictive covenants in November 3, 2010 (with that constitutional amendment possibly having retroactively authorized a 2009 restrictive covenants act).  There is also general agreement among attorneys that Georgia’s 2011 restrictive covenants act governs agreements that were signed after May 11, 2011.

Here is what we don’t know.

The problem is that there is no consensus on what law governs agreements that were signed between November 3, 2010 and May 11, 2011, for a variety of reasons that I have addressed in my previous posts.

Here is what the 11th Circuit has decided.

So what has the 11th Circuit said on the subject?  In Becham v. Synthes, an unreported case interpreting Georgia law, the 11th Circuit has opined that the earliest date the restrictive covenant law enacted in 2009 can have gone into effect is January 1, 2011, when the constitutional amendment belatedly authorizing the 2009 law went into effect.  What this means is that the 11th Circuit believes that Georgia’s long line of cases interpreting restrictive covenants applies to any agreement that was signed before January 1, 2011.  The time frame of the “great unknown” has now shrunk to the period of January 1, 2011 to May 11, 2011.

Here is what we still don’t know.

Why does this ruling still leave uncertainty?  First, this was a decision by a federal court interpreting matters of Georgia’s state law.  The Georgia Supreme Court could reach a different conclusion if it were to consider the issue, and any decision by the Georgia Supreme Court on matters involving purely state law would trump the 11th Circuit’s decision on that issue.  Second, the 11th Circuit’s decision is designated as “unpublished”, which means that the 11th Circuit has not authorized other courts (or even itself) to rely on this decision in any future rulings.  Third, even if the 11th Circuit’s ruling were binding in Georgia, it would only remove the uncertainty regarding agreements signed during a two-month time frame.  There would still be uncertainty as to what law governs agreements that were signed during the remaining 5 month time frame of January 1, 2011to May 11, 2011 which was not addressed by the Becham decision. And fourth, even though we have a little less uncertainty as to which of Georgia’s three sets of rules regarding restrictive covenants will apply to which time frame, we still have a whole lot of uncertainty over how to interpret the 2009 and 2011 restrictive covenants acts.  The irony is that the stated purpose of these changes in the law was to eliminate confusion.  Stay tuned.

The analysis set forth in this article is provided for general understanding only and should not be considered legal advice.  Counsel should always be consulted for advice regarding a specific situation.

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