Workers leaving a job often face limits to the jobs they can accept next due to contracts with the old employer. Meant to stop employees from bringing unfair competition to their former employers, they are do-not-compete or non-compete clauses, and restrictive covenants.
In 2011, our state’s Restrictive Covenant Act (RCA) revamped Georgia’s rules for restrictive covenants. But until late last year, no major court decisions had clarified which real-life non-competes they would uphold in tough cases. Now, a victory scored by a backhoe operator has given some guidance.
Railroad client follows a valued worker to his new job
The backhoe operator’s job involved railroad maintenance for one of his employer’s clients, a railroad company. The client liked the backhoe operator and his work so much that they switched companies when he left his job and began working for a competitor of his former employer.
The former employer filed suit to enforce the restrictive covenant they and the backhoe operator had signed about five years earlier.
Georgia’s RCA applies does not apply to every worker
Georgia’s RCA applies to separate types of employees in differing ways. For example, the Georgia Court of Appeals found, under one set of criteria it does not apply to the backhoe operator because he couldn’t hire or fire, couldn’t negotiate on behalf of the employer, didn’t have to make sales, and never had a customer list.
Applying key tests for a “key employee”
Ultimately, the court decision hinged on whether, and how, the RCA’s definitions of “key employee” applied to the operator.
A key employee, under one definition, gains high “notoriety, fame, reputation, or public persona as the employer’s representative or spokesperson” as the employer invests in them. Under the other definition, a key employee has special skills, knowledge or customer relationships that the employee gained working for the employer.
The court found that the backhoe operator fit the second definition, but not fit the first. His reputation came from his own personal qualities, not from investments by his employer.
Crucially, the court found he had to fit both definitions of “key employee” before his former employer could enforce its restrictive covenant against him.
