Anti-Competition Agreements and "minor defects"

Q. Proponents of Amendment One contend that minor defects, even a misplaced comma, could cause the invalidation of an anti-competition agreement. Are they right?

A. No. This question was examined in a recent email exchange, based on a review of a "Final Report" of the Georgia House of Representatives Study Committee on Restrictive Covenants in the Commercial Arena. The pertinent parts are printed below.

I was very interested to see what the proponents of Amendment One were urging in support of their claim that minor defects, even a misplaced comma, could cause the invalidation of the anti-competition covenant. For this point, in footnote 4, they cite only the Trujillo case, 289GaApp474. I had indexed that case in my notes as simply stating standard law without making any novel claims so I pulled the case.

The "minor defect" was that the covenant prevented the employee not just from competing for customers he serviced for the employer (which is one recognized valid area for restricting competition), nor for customers within a reasonable, defined territory (which is the other recognized valid area for restricting competition). These have been the options since Mouyal, 262Ga464, recognized the first of these two as distinct from the second in 1992. Instead, the employer wanted to push the envelope by creating a third category for restricting competition, namely, customers "about whom Employee had confidential or proprietary information because of his/her position with Employer."

To identify this case as one where "[e]ven a minute or technical defect in a restrictive covenant" invalidates the agreement is at best to misunderstand the holding in Trujillo. As the Court of Appeals noted, an employer could prevent a former employee for competing for any customer by having simply made accessible a customer list for any brief time during the employment. That would prohibit competition for all customers, not just those for whom the employee had a competitive advantage by virtue of working for the employer. The law has been exceedingly clear that this violates Georgia's constitutional right to compete. Cases in my notes on this point: 250Ga376 251Ga536 179GaApp674 183GaApp678 262Ga464 213GaApp891 264Ga480 218GaApp763 238GaApp281 244GaApp308 248GaApp424 #a10a0408.