Definitions

  1. Law
  2. Georgia Code
  3. Contracts
  4. Illegal and Void Contracts Generally
  5. Restrictive Covenants in Contracts
  6. Definitions

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As used in this article, the term:

  1. "Affiliate" means:
    1. A person or entity that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with another person or entity;
    2. Any entity of which a person is an officer, director, or partner or holds an equity interest or ownership position that accounts for 25 percent or more of the voting rights or profit interest of such entity;
    3. Any trust or other estate in which the person or entity has a beneficial interest of 25 percent or more or as to which such person or entity serves as trustee or in a similar fiduciary capacity; or
    4. The spouse, lineal ancestors, lineal descendants, and siblings of the person, as well as each of their spouses.
  2. "Business" means any line of trade or business conducted by the seller or employer, as such terms are defined in this Code section.
  3. "Confidential information" means data and information:
    1. Relating to the business of the employer, regardless of whether the data or information constitutes a trade secret as that term is defined in Code Section 10-1-761;
    2. Disclosed to the employee or of which the employee became aware of as a consequence of the employee's relationship with the employer;
    3. Having value to the employer;
    4. Not generally known to competitors of the employer; and
    5. Which includes trade secrets, methods of operation, names of customers, price lists, financial information and projections, route books, personnel data, and similar information;

      provided, however, that such term shall not mean data or information (A) which has been voluntarily disclosed to the public by the employer, except where such public disclosure has been made by the employee without authorization from the employer; (B) which has been independently developed and disclosed by others; or (C) which has otherwise entered the public domain through lawful means.

  4. "Controlling interest" means any equity interest or ownership participation held by a person or entity with respect to a business that accounts for 25 percent or more of the voting rights or profit interest of the business prior to the sale, alone or in combination with the interest or participation held by affiliates of such person or entity.
  5. "Employee" means:
    1. An executive employee;
    2. Research and development personnel or other persons or entities of an employer, including, without limitation, independent contractors, in possession of confidential information that is important to the business of the employer;
    3. Any other person or entity, including an independent contractor, in possession of selective or specialized skills, learning, or abilities or customer contacts, customer information, or confidential information who or that has obtained such skills, learning, abilities, contacts, or information by reason of having worked for an employer; or
    4. A franchisee, distributor, lessee, licensee, or party to a partnership agreement or a sales agent, broker, or representative in connection with franchise, distributorship, lease, license, or partnership agreements.

      Such term shall not include any employee who lacks selective or specialized skills, learning, or abilities or customer contacts, customer information, or confidential information.

  6. "Employer" means any corporation, partnership, proprietorship, or other business organization, whether for profit or not for profit, including, without limitation, any successor in interest to such an entity, who or that conducts business or any person or entity who or that directly or indirectly owns an equity interest or ownership participation in such an entity accounting for 25 percent or more of the voting rights or profit interest of such entity. Such term also means the buyer or seller of a business organization.
  7. "Executive employee" means a member of the board of directors, an officer, a key employee, a manager, or a supervisor of an employer.
  8. "Key employee" means an employee who, by reason of the employer's investment of time, training, money, trust, exposure to the public, or exposure to customers, vendors, or other business relationships during the course of the employee's employment with the employer, has gained a high level of notoriety, fame, reputation, or public persona as the employer's representative or spokesperson or has gained a high level of influence or credibility with the employer's customers, vendors, or other business relationships or is intimately involved in the planning for or direction of the business of the employer or a defined unit of the business of the employer. Such term also means an employee in possession of selective or specialized skills, learning, or abilities or customer contacts or customer information who has obtained such skills, learning, abilities, contacts, or information by reason of having worked for the employer.
  9. "Legitimate business interest" includes, but is not limited to:
    1. Trade secrets, as defined by Code Section 10-1-761;
    2. Valuable confidential information that otherwise does not qualify as a trade secret;
    3. Substantial relationships with specific prospective or existing customers, patients, vendors, or clients;
    4. Customer, patient, or client good will associated with:
      1. An ongoing business, commercial, or professional practice, including, but not limited to, by way of trade name, trademark, service mark, or trade dress;
      2. A specific geographic location; or
      3. A specific marketing or trade area; and
    5. Extraordinary or specialized training.
  10. "Material contact" means the contact between an employee and each customer or potential customer:
    1. With whom or which the employee dealt on behalf of the employer;
    2. Whose dealings with the employer were coordinated or supervised by the employee;
    3. About whom the employee obtained confidential information in the ordinary course of business as a result of such employee's association with the employer; or
    4. Who receives products or services authorized by the employer, the sale or provision of which results or resulted in compensation, commissions, or earnings for the employee within two years prior to the date of the employee's termination.
  11. "Modification" means the limitation of a restrictive covenant to render it reasonable in light of the circumstances in which it was made. Such term shall include:
    1. Severing or removing that part of a restrictive covenant that would otherwise make the entire restrictive covenant unenforceable; and
    2. Enforcing the provisions of a restrictive covenant to the extent that the provisions are reasonable.
  12. "Modify" means to make, to cause, or otherwise to bring about a modification.
  13. "Products or services" means anything of commercial value, including, without limitation, goods; personal, real, or intangible property; services; financial products; business opportunities or assistance; or any other object or aspect of business or the conduct thereof.
  14. "Professional" means an employee who has as a primary duty the performance of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction or requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor. Such term shall not include employees performing technician work using knowledge acquired through on-the-job and classroom training, rather than by acquiring the knowledge through prolonged academic study, such as might be performed, without limitation, by a mechanic, a manual laborer, or a ministerial employee.
  15. "Restrictive covenant" means an agreement between two or more parties that exists to protect the first party's or parties' interest in property, confidential information, customer good will, business relationships, employees, or any other economic advantages that the second party has obtained for the benefit of the first party or parties, to which the second party has gained access in the course of his or her relationship with the first party or parties, or which the first party or parties has acquired from the second party as the result of a sale. Such restrictive covenants may exist within or ancillary to contracts between or among employers and employees, distributors and manufacturers, lessors and lessees, partnerships and partners, employers and independent contractors, franchisors and franchisees, and sellers and purchasers of a business or commercial enterprise and any two or more employers. A restrictive covenant shall not include covenants appurtenant to real property.
  16. "Sale" means any sale or transfer of the good will or substantially all of the assets of a business or any sale or transfer of a controlling interest in a business, whether by sale, exchange, redemption, merger, or otherwise.
  17. "Seller" means any person or entity, including any successor-in-interest to such an entity, that is:
    1. An owner of a controlling interest;
    2. An executive employee of the business who receives, at a minimum, consideration in connection with a sale; or
    3. An affiliate of a person or entity described in subparagraph (A) of this paragraph; provided, however, that each sale involving a restrictive covenant shall be binding only on the person or entity entering into such covenant, its successors-in-interest, and, if so specified in the covenant, any entity that directly or indirectly through one or more affiliates is controlled by or is under common control of such person or entity.
  18. "Termination" means the termination of an employee's engagement with an employer, whether with or without cause, upon the initiative of either party.
  19. "Trade dress" means the distinctive packaging or design of a product that promotes the product and distinguishes it from other products in the marketplace.

(Code 1981, §13-8-51, enacted by Ga. L. 2011, p. 399, § 4/HB 30.)

Law reviews.

- For article, "Contracts: Illegal and Void Contracts Generally," see 28 Ga. St. U.L. Rev. 21 (2011). For annual survey on labor and employment law, see 71 Mercer L. Rev. 137 (2019).

JUDICIAL DECISIONS

Key employee.

- To be a key employee for purposes of Georgia's Restrictive Covenants Act, O.C.G.A. § 13-8-50 et seq., an employee must meet the requirements of both sentences of subdivision 8 of O.C.G.A. § 13-8-51. Blair v. Pantera Enterprises, Inc., 349 Ga. App. 846, 824 S.E.2d 711 (2019).

Trial court erred in granting injunctive relief to the former employer as the former employee did not violate a non-compete agreement because, even if the employee was in possession of selective or specialized skills that the employee obtained by reason of having worked for the employer, the employee did not meet the definition of a key employee under Georgia's Restrictive Covenants Act, O.C.G.A. § 13-8-50 et seq., as the employee gained a good reputation with a railway company due to the employee's work ethic and personal attributes, not by reason of the employer's investment of time, training, money, trust, exposure to the public, or exposure to customers, vendors, or other business relationships during the course of the employee's employment with the employer. Blair v. Pantera Enterprises, Inc., 349 Ga. App. 846, 824 S.E.2d 711 (2019).

Legitimate business interest.

- Non-compete provision was supported by legitimate business interests in that the employer had devoted considerable resources to developing the employer's name recognition and customer base and the employer had a legitimate interest in protecting itself from the risk that the former employee might appropriate customers by taking advantage of contacts developed while working for the employer. Kennedy v. Shave Barber Co., 348 Ga. App. 298, 822 S.E.2d 606 (2018), cert. denied, No. S19C0624, 2019 Ga. LEXIS 611 (Ga. 2019).

Construction with O.C.G.A. § 13-8-53. - Taken together, the clear and plain language of O.C.G.A. §§ 13-8-51(15) and13-8-54(b) compels a conclusion that any agreement that meets the definition of restrictive covenant under the Restrictive Covenants Act, O.C.G.A. § 13-8-50 et seq., and is otherwise not excepted from the Act's provisions, is subject to the terms of the Act and must comply with the terms of the Act. Restricting the Act's scope to merely the provisions that are explicitly mentioned in O.C.G.A. § 13-8-53 would render meaningless the majority of the broad definition of "restrictive covenant" located in O.C.G.A. § 13-8-51(15), which contains many more types of agreements. Belt Power, LLC v. Reed, 354 Ga. App. 289, 840 S.E.2d 765 (2020).

Restrictive covenant.

- Because O.C.G.A. §§ 13-8-51(15) and13-8-54(b) compelled a conclusion that any agreement that met the Restrictive Covenants Act's, O.C.G.A. § 13-8-50 et seq., definition of restrictive covenant, and was otherwise not excepted from the act's provisions, was subject to the terms of the act and had to comply with the terms of the act, and the employee no-hire and the employee no-solicitation covenants were clearly agreements to protect the former employer's interest in its employees, the act applied to those agreements; however, after considering the former employer's legitimate business interests, the trial court did not err when the court declined to use the act's blue pencil provision to modify the covenants to make the covenants enforceable. Belt Power, LLC v. Reed, 354 Ga. App. 289, 840 S.E.2d 765 (2020).


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