Seek Advice In Drafting Trade Secrets And Confidentiality Agreements

In an article recently posted at mondaq.com, Richard Stobbe provides several excellent examples of why employers should consult with their counsel when drafting trade secrets and confidentiality agreements, instead of copying cookie-cutter examples found on the internet.

In his article, Keeping Secrets: Trade Secrets and Confidentiality Agreements, Stobbe notes that many “off-the-shelf” agreements are drafted with terms that do not apply to the employer’s business or the specific transaction, or apply another state’s laws.  Also, many form agreements define key terms, such as “confidential information,” which an employer may not be aware of or understand.  The failure to strictly comply with these defined terms may render the agreement unenforceable.

The issues raised in Stobbe’s article are especially relevant for employers in Tennessee where agreements restricting trade are generally disfavored and strictly construed against the employer.  Rather than rely on form agreements, employers should consult with counsel to insure their non-compete, trade secrets, and confidentiality agreements comply with their state’s laws.

If you would like additional information on non-compete agreements and trade secrets law, please contact one of the Burr & Forman Non-Compete & Trade Secrets team members.

Is An Assigned Non-Compete Agreement Enforceable?

In the case of a merger or acquisition, the successor company might take an assignment of the current non-compete agreements in favor of the predecessor company.  The enforceability of an assigned non-compete agreement, however, varies from state-to-state, as is true with most issues concerning non-compete law.  Below is a quick survey of how some of the states in the Southeast address the issue:

Georgia – Non-compete agreements, similar to most contracts in the state, are assignable provided that the duties under the agreement do not materially vary from the performance required by the original parties and provided that the contract is not for personal services.  West Coast Cambridge, Inc. v. Rice, 262 Ga. App. 106 (2003) (finding that successor partnership could enforce noncompete agreement against doctor because the law provided no prohibition against the assignment of the agreement and the agreement was expressly binding on successors and assigns, and noting that contract was not for personal services because it only obligated the doctor to not take certain actions).

Tennessee - Tennessee law recognizes that covenants not to compete are assignable absent specific language in the covenants prohibiting assignment.  See Packers Supply Co. v. Weber, 2008 Tenn. App. LEXIS 226 (Tenn. Ct. App. Apr. 14, 2008) (citing Bradford & Carson v. Montgomery Furniture Co., 115 Tenn. 610, 92 S.W. 1104 (Tenn. 1906)).

Alabama - Because non-compete agreements are disfavored as a restraint on trade (see Ala. Code § 8-1-1), a successor employer cannot enforce an employee’s covenant not to compete.  Construction Materials v. Kirkpatrick Concrete, 631 So. 2d 1006 (Ala. 1994) (refusing to enforce noncompete agreement for successor of employer and noting that the legislature’s omission of a specific provision in Ala. Code § 8-1-1 establishing a successor employer’s right to enforce an employee’s covenant with the predecessor employer creates an affirmative interference that this code section was not intended to allow enforcement by successor employers).

Florida - In Florida, the question is answered specifically by  Fla. Stat. § 542.335(1)(f)(2), which provides that a “court shall not refuse enforcement of a restrictive covenant on the ground that the person seeking enforcement is . . . an assignee or successor” provided that “the restrictive covenant expressly authorized enforcement by a party’s assignee or successor.”  Recently, Florida’s First District Court of Appeal held that a general assignment clause (such as a statement that the agreement will “inure to the benefit of and be binding upon . . . assigns and successor) is sufficient to assign the agreement to a successor.  DePuy Orthopaedics, Inc. v. Waxman, 95 So. 3d 928 (Fla. Dist. Ct. App. 1st Dist. 2012).

BURR POINT:  Special attention should be paid when drafting a non-compete covenant to ensure that the assignability of the covenant is in accordance with the parties’ expectations and the applicable state law.

 

If you would like additional information on non-compete agreements and trade secrets law, please contact one of the Burr & Forman Non-Compete & Trade Secrets team members.

Engineers Convicted for Theft of Trade Secrets

Two engineers were recently convicted under federal law for stealing trade secrets from Goodyear.  (United States v. Howley and Roberts, 2013 WL 399345 (Feb. 4, 2013 6th Cir.).)  Charles Roberts and Sean Howley worked as engineers for Wyko Tire Technology, a Tennessee Company.  Wyko supplied Goodyear with parts for tire-assembly machines.  Wyko also had an agreement with HaoHua South China Rubber Company to supply tire-building parts related to the swabbing-down process.  Unfortunately for Wyko, it had never built the parts it promised to HaoHua.  Goodyear, it turned out, was using machines like the ones Wyko needed to make.

Around the time Wyko entered the agreement with HaoHua, Goodyear asked Wyko to send a technician to repair some of its tire-assembly machines at a plant in Topeka, Kansas.  Instead of sending a technician, Wyko sent Roberts and Howley.  While Roberts and Howley were left unescorted for a few minutes, Howley used his cell-phone camera to take seven photos of a swabbing-down device on one of Goodyear’s tire-assembly machines.  When Howley returned to Tennessee, he sent the photos from his personal e-mail account to his Wyko account.  He then forwarded the photos to Roberts, stating that the photos were “not all great, but I think that they might tell us enough.”

Roberts, in turn, sent the photos to other members of Wyko’s design team.  He stated Goodyear was “somewhat guarded” because they knew Wyko was “working with competitors.”  He acknowledged that Howley was able to take the photos when Goodyear “left us on our own for a while.”  When Wyko’s IT manager discovered Roberts’ e-mail and pictures, he alerted Goodyear of the potentially illicit photos.  Goodyear notified the FBI which ultimately led to Roberts and Howley’s conviction.

Under federal law, a person who steals a trade secret that is produced or placed in interstate or foreign commerce can be fined and imprisoned up to 10 years.  (18 U.S.C. § 1832.)  A primary contention in the Roberts and Howley trial was whether the swabbing-down device Howley photographed was a “trade secret” covered by federal law.  Under federal law, information is a “trade secret” only if its owner has taken “reasonable measures” to keep the secret and the “information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the public.  (18 U.S.C. § 1839(3).)

Roberts and Howley’s convictions were supported in large part by Goodyear’s efforts to protect the secrecy of its tire-assembly machine’s design, including the swabbing-down device.  These included:

  1. protecting its Topeka, Kansas facility with a fence;
  2. requiring visitors to pass through a security checkpoint;
  3. requiring visitors to obtain advance permission before visiting the facility;
  4. requiring visitors to sign confidentiality agreements and agree not to take photographs during their visit; and
  5. requiring its suppliers, including Wyko, to keep Goodyear’s proprietary information secret.

The Court also found information regarding Goodyear’s swabbing down device was economically valuable because it was not “readily ascertainable through proper means” by the public, and Robert and Howley’s conduct shows the information they stole was important.

As shown by the convictions of Roberts and Howley, a company should take reasonable measures to protect its proprietary information.  The Court noted in Howley and Roberts the “’reasonable measures’ requirement does not mean a company must keep its own employees and suppliers in the dark about machines they need to do their work.”  However, a company cannot claim information is a trade secret if it does not treat the information like a trade secret.

It should also be noted that the same statute used to convict Roberts and Howley also imposes a fine up to $5,000,000 against a company which steals trade secrets.  Had Wyko used the stolen trade secrets and not alerted the FBI, it could have faced the same criminal charges and suffered significant economic loss.

If you would like additional information on trade secrets law, please contact one of the Burr & Forman Non-Compete & Trade Secrets team members.

Analysis of a Winning Argument for Enforcing a Non-Compete Agreement at the Preliminary Injunction Stage

On December 18, 2012, the United States District Court for the Western District of Tennessee entered an Order granting an employer’s application for a preliminary injunction preventing its former employees from soliciting the employer’s customers. The Order is an excellent example of issues employers should focus on when arguing for the
enforcement of non-compete agreements at the preliminary injunction stage.

In Smith & Nephew, Inc. v. Northwest Ortho Plus, Inc., et al., Docket No. 2:12-cv-02476, the employer claimed its former employees violated their non-compete agreements by diverting the employer’s customers to its direct competitors. The employer sought a preliminary injunction prohibiting the employees from breaching their non-compete agreements pending the resolution of the case at trial.

In order to prevail on its petition for a preliminary injunction, the employer had to prove: (1) it had a strong likelihood of proving the non-compete agreement should be enforced; (2) it would suffer irreparable harm if the non-compete agreement was not enforced pending trial; (3) third parties would not be harmed by enforcement of the non-compete agreement; and (4) the public interest would be served by enforcing the non-compete agreement pending trial.

In this case, the employer proved the final three factors by showing (1) it suffered irreparable harm when it lost customer goodwill because customer goodwill is difficult to calculate; (2) consumers of medical devices would not suffer because they could continue to purchase products from the plaintiff; and (3) there is a public interest in enforcing contracts as written.

As to the first factor, the employer showed there is a strong likelihood it would prevail in enforcing the non-compete agreement. First, the agreement protects the employer’s legitimate business interest by preventing the former employees from gaining an unfair advantage in future competition. Second, the agreement is reasonable because it resulted in little, if any hardship to the former employees and the public. Third, the agreement imposes time and territorial limits that are no greater than necessary to protect the employer’s legitimate business interest.

Employers seeking to enforce non-compete agreements should review this order. It provides a great example of how to argue a non-compete agreement at the preliminary injunction stage and applies the leading Tennessee non-compete cases in a ruling favorable to the employer.

If you would like additional information on trade secrets law, please contact one of the Burr & Forman Non-Compete & Trade Secrets team members.

How Public Interest May Limit Enforcement of a Non-Compete Agreement

Though non-compete agreements are generally disfavored in Tennessee as a restraint on trade, courts will enforce them if the employer has a legitimate business interest to protect and the time and territorial limits are reasonable.  Courts strictly construe non-compete agreements in favor of the employee and may revise the terms the agreement when necessary to balance the interests of the employee and employer.

Like other contracts, however, non-compete agreements which implicate important public policy issues are even more strictly construed and may be unenforceable.

In 2005, the Tennessee Supreme Court held non-compete agreements which restrict a physician’s ability to practice medicine are unenforceable.  The Court decision’s was based on a belief that having a greater number of physicians practicing in a community benefits the public by providing greater access to health care.  Also, increased competition for patients tends to improve the quality of care and keep costs affordable.  Further, a person has the right to choose his or her physician and to continue an on-going professional relationship with that physician.  Enforcing a non-compete agreement would impair or even deny the patient’s rights altogether.

Though the Tennessee Supreme Court’s 2005 decision was overturned by the Tennessee Legislature (see James Haltom’s discussion in his April 25, 2012 post discussing the most recent amendments to the physician non-compete law effective January 1, 2012), it is a good example of how the public interest in professional services may render a non-compete agreement unenforceable.  Other states continue to hold that a physician’s practice may not be limited by a non-compete agreement.

Another area in which courts have long held non-compete agreements are unenforceable is legal services.  In 1991 the Tennessee Supreme Court held a law firm’s deferred compensation plan which was contingent on the departing attorney not practicing law was a non-compete agreement.  In holding the non-compete agreement was unenforceable, the Tennessee Supreme Court stated that, “[t]he practice of law is a profession, not a business, that clients are not merchandise, and that lawyers are not tradesmen.”

As in the Tennessee Supreme Court’s 2005 related to physicians, the Tennessee Supreme Court in 1991 found that non-compete agreements restricting an attorney’s ability to practice law also harms the public good.  These cases demonstrate that there are professional services which benefit the public at large and are viewed differently than other business transactions.

The cases in which a non-compete agreement is unenforceable because it harms the public good are few.  The focus is primarily on whether the terms of the non-compete agreement are reasonable.  However, in drafting non-compete agreements, employers should keep in mind that in some instances the post-employment restrictions placed on a former employee could be construed as implicating important public policy issues which may render the non-compete agreement unenforceable.

Please contact any member of Burr & Forman’s Non-Compete and Trade Secrets team members with any questions you may have regarding non-compete and trade secrets issues.

Tennessee’s “Rule of Reasonableness” Allows Courts to Modify Non-Compete Agreements

On August 22, 2012, we reported on the Veit v. Event Logistics, Inc., a case pending in the Davidson County Chancery Court, Docket No. 12-945, in which an employee challenged her employer’s non-compete agreement.  The agreement prohibited the employee for a period of two years from (1) engaging in activities competing with the employer within a 50 mile radius of employer’s office in Nashville; (2) soliciting the employer’s customers with whom the employee had contact while employed by the employer; and (3) soliciting any of employer’s employees to terminate his/her employment.

At the temporary injunction stage of the litigation, the Court did not completely enforce or reject the non-compete agreement.  Rather, the Court modified the agreement to allow the employee to engage in certain activities so she could make a living while offering some level of protection for the employer.  In particular, the Court allowed the employee to engage in the same activities she did with the employer (with a monetary cap), but prohibited her from engaging in those activities with the employer’s clients.

The Court’s modification of the non-compete agreement in Veit is a good example of the “Rule of Reasonableness” Tennessee courts apply to non-compete agreements.  Generally, there are four approaches courts around the country will take in enforcing or rejecting a non-compete agreement.

  1. The court will not enforce the non-compete agreement because non-compete agreements are void as a matter of law.
  2. The court will enforce the non-compete agreement as written.
  3. The court will “blue-pencil” the non-compete.  This means the court will only strike offending provisions from the non-compete agreement, but will not add new provisions or otherwise modify the non-compete agreement.  If the “blue-pencil” approach leaves the non-compete agreement incomprehensible or cannot eliminate the offending provision, the court will reject the agreement all together.
  4. The court will equitably reform the non-compete agreement which can result in rewriting the agreement.  This approach balances between the goals of encouraging a free market place and preventing unfair competition.

Recognizing that the “all or nothing” approach of either enforcing or rejecting a non-compete agreement in its entirety and the “blue-pencil” approach led to undesirable results, Tennessee courts adopted the Rule of Reasonableness (“ROR”).  Under the ROR, Tennessee courts may rewrite the non-compete agreement to balance between the employer and employee’s competing interests.  The ROR is consistent with and is an extension of the rule that the terms of the non-compete agreement, including time and geographical limitations, must be reasonable.  The restrictions of the non-compete agreement must be no greater than necessary to protect the employer’s legitimate business interest.  (For a further discussion on the “reasonableness” requirements, see our May 9, 2012 blog post.)

Applying the ROR, the Court in Veit modified the non-compete agreement to allow the employee to make a living while protecting them employer’s interest in its customer base.  Though Tennessee Courts have the power to modify non-compete agreements, employers should carefully draft their agreements to avoid costly and uncertain litigation.  Though the ROR seeks to strike a balance between the employer and employee’s competing interests, a modified non-compete agreement could result in significant harm to the employer.

If you would like additional information on trade secrets law, please contact one of the Burr & Forman Non-Compete & Trade Secrets team members.

The Court’s Broad Power To Enjoin Trade Secret Violations Can Be Costly

On June 27, 2012, we reported that TNA Entertainment, LLC (“TNA”), a local professional wrestling promotion company, sued its former employee, Brian Wittenstein, and a direct competitor, World Wrestling Entertainment, Inc. (“WWE”), for unlawfully using TNA’s trade secrets to unfairly compete against TNA.  (TNA Entertainment, LLC v. Wittenstein and World Wrestling Entertainment, Inc., Davidson County Chancery Court, Docket No. 12-746-III.)  The alleged trade secrets included information about TNA’s contracts with wrestling talent.  TNA alleged that WWE used TNA’s trade secrets to solicit wrestling talent already under contract with TNA.

In addition to the damages it claims to have suffered, TNA also requested that the Court enter a temporary restraining order (“TRO”) to prohibit WWE and Wittenstein from continuing to use TNA’s trade secrets.  Under Tennessee law, a Court may restrain an offending party from engaging in certain conduct when the injured party shows it will suffer immediate and irreparable harm.  TROs generally last for a short period of time, but may be extended if there is good cause to do so.  The Court may also issue a temporary injunction which can last during the life of the lawsuit.

On May 24, 2012, the Court in TNA Entertainment issued a comprehensive, far reaching TRO which could have had adverse effects on WWE’s business.  The restraining order prohibited WWE and Wittenstein from doing the following:

  1. Breaching or attempting to breach Wittenstein’s Separation Agreement with TNA, including disclosing, transmitting, or otherwise using TNA’s confidential, trade secret, and proprietary information;
  2. Retaining and failing to return TNA’s confidential, trade secret, and proprietary information or property in any form;
  3. Destroying, deleting, erasing, modifying, or otherwise failing to preserve TNA’s confidential, trade secret, and proprietary information;
  4. Soliciting or contracting wrestling talent identified in TNA’s confidential information or taken by Wittenstein; and
  5. Interfering with TNA’s contracts and prospective business relationships which WWE learned through TNA’s confidential, trade secret, and proprietary information.

In addition, the Court specifically required WWE and Wittenstein to not destroy or alter and to provide access information to any computers or similar devices which WWE and Wittenstein used in storing, transmitting, or receiving TNA’s confidential information and trade secrets.  The purpose of this requirement is to allow TNA to inspect WWE and Wittenstein’s computers for use of TNA’s confidential information and trade secrets.

As a condition to entering the Restraining Order, TNA was required to post a $30,000 bond.

The May 24, 2012 TRO was later dissolved as to WWE.  After a hearing, the Court determined that WWE posed no threat of immediate or irreparable harm to TNA and had already returned TNA’s property.  WWE also committed to not solicit TNA’s wrestling talent and to preserve its computers and other devices for inspection at a later date.

While the TRO seems to have had little effect on WWE, because WWE had already taken corrective action with respect to TNA’s confidential information and trade secrets, in other cases such a comprehensive TRO and/or temporary injunction could prove to be costly.  A new employer could suffer loss of business, damages for interfering with a competitor’s contracts, significant costs for litigation, and loss of reputation.  As we said earlier, employers should always be aware of and protect themselves against potential liability when hiring an employee who may possess a former employer’s confidential trade secrets. If you have any questions for your business on trade secrets or liabilities when hiring an employee, don’t hesitate to contact one of the Burr & Forman Non-Compete & Trade Secrets team members.

Preparing for a Smack Down: Local Wrestling Company Sues Former Employee and World Wrestling Entertainment for Trade Secrets Violation

A local professional wrestling promotions company, TNA Entertainment, LLC (“TNA”), has sued former employee, Brian Wittenstein, and direct competitor, World Wrestling Entertainment, Inc. (“WWE”), for unlawfully using TNA’s trade secrets against them in unfair competition.  The case, entitled TNA Entertainment, LLC v. Wittenstein and World Wrestling Entertainment, Inc., was filed on May 23, 2012 in the Davidson County Chancery Court, Docket No. 12-746-III and alleges that Wittenstein and WWE violated Tennessee’s Uniform Trade Secrets Act.

According to TNA, Wittenstein was terminated from the company on August 3, 2011.  In connection with his separation, Wittenstein entered into a Separation Agreement and General Release (the “Agreement”), which expressly prohibited him from disclosing TNA’s confidential trade secrets, including information about TNA’s contracts with other wrestling talent.

TNA claims that Wittenstein violated the agreement by downloading TNA’s company policies, contractual agreements with other wrestling talent, and detailed information about its wrestling talent (including compensation). TNA then claims that Wittenstein disclosed the gathered information to his new employer, and direct competitor of TNA, WWE.  TNA asserts that WWE’s possession and use of TNA’s confidential trade secrets provide WWE an unfair competitive advantage regarding wrestling talent.

TNA alleges that WWE has used TNA’s confidential trade secrets to solicit wrestling talent currently, under contract with TNA, and encourage them to join WWE.  Wrestler Ric Flair is a recent example of a client that TNA claims attempted to terminate his exclusive contract with them to sign up with WWE.

To date, the court has entered a temporary restraining order, prohibiting WWE from using TNA’s confidential information.  Though this case is relatively new, it is a prime example of how costly unlawful use of trade secrets can be to former employees and new employers.  Under the Tennessee Uniform Trade Secrets Act, the unlawful user of trade secrets can be liable for the plaintiff’s actual loss caused by the misappropriation of trade secrets and any “unjust enrichment.”  In certain cases, the defendant may also be liable for “exemplary damages” resulting in up to twice the award for the plaintiff’s damages and the plaintiff’s attorney fees.

Ultimately, employers should always be aware of and protect themselves against potential liability when hiring an employee who may possess a former employer’s confidential trade secrets. If you need more information on confidential trade secrets and defenses against former employees, please contact any of the Burr & Forman Non-Compete & Trade Secrets team members for assistance.

New Frivolous Lawsuit Statute May Chill Claims for Breach of Non-Compete Agreements

On May 21, 2012, Governor Haslam signed into law HB 3124, a bill amending Tennessee Code Annotated § 20-12-119.  The new law, effective July 1, 2012, requires the court in a civil case to penalize a plaintiff whose claim is dismissed as meritless.

Prior to the new law, a court had discretion in civil cases to adjudge costs between litigants.  Except when allowed by statute or a contract, the award of costs would not include the prevailing party’s attorney fees.  Now, the court must award costs and attorney fees to a defendant if the plaintiff’s case is dismissed as frivolous.  The award includes court costs, attorney fees, and court reporter fees.  The plaintiff’s liability is capped at $10,000.

Though viewed as part of Tennessee’s efforts at tort reform, the amendment to Section 20-12-119 could have an adverse effect on employers who attempt to enforce a contractual non-compete agreement.  An employer could be liable to a former employee for costs, including attorney fees, if its suit to enforce a non-compete agreement is dismissed as meritless.

Such was the case under South Carolina’s Frivolous Civil Proceedings Act (the “FCPA”) in Wachovia Securities, LLC v. Brand, 671 F.3d 472 (4th Cir. 2012).  In that case, the employer instituted arbitration proceedings against former employees before the Financial Industry Regulatory Authority.  The employer claimed that the former employees conspired with a rival broker to open a competing office using the former employer’s trade secrets and solicited the employer’s customers in violation of a non-compete agreement.

After more than a month of proceedings, the arbitration panel dismissed all of the employer’s claims and awarded the former employees $1.1 million in attorney fees under the FCPA.  The Fourth Circuit Court of Appeals upheld the federal district court’s refusal to overturn the arbitration panel’s award of attorney fees under the FCPA.

BURR POINT:  Though the amendment to section 20-12-119 is not as severe as South Carolina’s FCPA, with liability capped at $10,000 and other limitations, employers will need to ensure they have good grounds before bringing an action against former employees to enforce a non-compete agreement.  If the claim is dismissed as meritless, the employer could be liable to the former employee for up to $10,000.

For more information, if you have any questions about non-compete agreements, or if you have an unfair competition issue, please contact any of the Burr & Forman’s Non-Compete & Trade Secrets team members and we will be happy to assist you.

 

Early Court Opinions Construing Georgia’s New Non-Compete Statute Confirm Need For Employers to Have Employees Execute New Agreements

As previously reported by this commentator and others, Georgia enacted a new non-compete statute (O.C.G.A. §13-8-50 et seq.), effective May 11, 2011, which drastically alters non-compete agreements in Georgia.  Georgia was previously one of the most difficult states in which to enforce a non-compete agreement, but overnight, Georgia law and public policy changed to become more favorable to employers. The most significant deviation from the prior law is that courts are now allowed to judicially modify (“blue-pencil”) non-compete agreements that are deemed to be overbroad. Before this change, Georgia court had no choice but to rule as void any non-compete that did not meet Georgia’s strict drafting requirements.  Thus, under the new statute, any agreement is potentially enforceable to some degree.  The one catch with the statute is that it only applies to non-compete agreements executed on or after the effective date.

While the new statute was favorably received by Georgia employers, it immediately raised at least two questions for attorneys practicing in the non-compete arena: (1) How would judges use their new found blue-pencil powers for agreements they deemed to be overbroad? and (2) Would courts give any deference to Georgia’s new pro non-compete public policy in interpreting and enforcing non-compete agreements that pre-date the effective date of the statute, even though technically it’s not applicable to those agreements? Eight months into life under the new statute, those questions are starting to get answered, as evidenced by two opinions by Judge Story of the United States District Court for the Northern District of Georgia.

Judge Story’s ruling on a motion for preliminary injunction in Pointenorth Insurance Company v. Zander (2011 U.S. Dist. LEXIS 11341) provides the first published opinion wherein a court applied the new statute and used the judicial “blue pencil” to modify and then enforce a no-compete agreement.  In this case, the plaintiff-employer sued a former employee to enforce a customer non-solicitation covenant contained in an employment agreement dated May 11, 2011 (the effective date of Georgia’s new non-compete statute).  Judge Story found the non-solicit provision to be overbroad because it purported to forbid the employee from soliciting “any of the Employer’s clients”, as opposed to just those with whom the customer interacted.  In exercising the powers granted under the new statute, however, the court modified the non-solicit provision to apply only to customers that the former employee “contacted and assisted” while employed with the plaintiff and granted the requested injunction in accordance with the blue-penciled terms of the agreement.

Another ruling by Judge Story, however, highlights the answer (in the negative) to the question of whether the new public policy would have any effect on non-compete agreements pre-dating effective date of the new statute.  In Boone v. Corestaff Support Services, Inc. (2011 U.S. Dist. LEXIS 85454 (N.D.Ga. 2011)), the court reconsidered a previous decision and held that Georgia’s new non-compete statute, and the employer-friendly public policy it embodies, cannot apply in any way in interpreting and enforcing a non-compete executed prior to the statute. For the agreements drafted prior to the statute, the more-strict prior rules apply, regardless of whether the outcome may be vastly different than if the new statue applied.  In so holding, Judge Story followed the decision of the Georgia Court of Appeals in Bunker Hill Int’l, Ltd. v. Nationsbuilder Ins. Servs, Inc., (309 Ga. App. 503, 710 S.E. 2d. 662 (2011)).  This same conclusion has subsequently been reached by other Federal District Court judges and appellate panels in the state.  See Fantastic Sams Salons Corp. v. Maxie Enterprises, Inc., (2012 U.S. Dist. LEXIS 8106 (N.D.Ga. 2012)); Hix v. Aon Risk Servs. South, Inc., (2011 U.S. Dist. LEXIS 134569 (N.D. Ga. 2011)); Murphree v. Yancey Bros. Co. (311 Ga. App. 744, 716 S.E. 2d. 824 (2011)).

BURR POINTThe early indication is that courts in Georgia are readily willing to use their new statutory power to judicially modify overbroad non-compete agreements, but only for those agreements executed on or after the effective date of the statute (May 11, 2011).  Any older agreements will still be reviewed under the previous statutes with no help from the newly declared pro non-compete public policy.  Accordingly, Georgia employers should consult an attorney to assist them in having employees under non-compete agreements predating May 11, 2011, execute new agreements.