Dodging Hauser GA: Employee evades broad restrictive covenants

Case law interpreting Georgia’s Restrictive Covenants Act (RCA) continues to make its way through the courts, and the message is consistent: Despite the RCA’s proclamation that restrictive covenants are in favor of public policy, employers that don’t adhere to the statute’s narrow standards risk not being able to enforce them, even with the law's blue-penciling prerogatives. In the following case, the court considered state and federal RCA decisions to date and ultimately ruled to greatly limit the company’s ability to enforce customer nonsolicitation and employee nonrecruitment covenants in an agreement form it used for all employees across the country.

Customer nonsolicitation

Hauser, Inc., is an insurance brokerage firm. Its agreement contained a three-year nonsolicitation provision that applied to anyone who had been a customer during the previous 18-month period. The court noted the RCA specifically provides a court “shall presume to be unreasonable in time any restraint more than two years in duration.”

Unreasonable length. In an attempt to rebut the presumption, Hauser provided evidence showing it generally took 24 to 36 months to solidify a customer relationship, but the court wasn’t persuaded. It noted the temporal restriction at issue applied to all company employees, in all agreements, regardless of title, duties, geographic location, actual customer contact, or even access to sensitive company information. It thus ruled the covenant was unreasonable in terms of time and invalid.