The Contract Right

If Amendment 1 passes it would set up a very real scenario of legal indentured servitude.

In this nation and in our state constitution, we have a near inviolable right to enter into contracts between parties at arms length from equal bargaining positions.

Sadly, some in this state want to abolish that right when it comes to employment contracts between an employer and employee.

But they don’t just want to abolish that right, they also want to hand over to the State of Georgia the power to alter contracts entered into at arms length between an employer and job prospect.

Giving the State the power to alter any contract is a bad idea — especially when it will only work one way. Where Georgia’s courts have in the past worked to ensure employment contracts are bargained for between equals, or as close as you can make an employer and employee equals within a negotiation, some would have the courts and law put the employee in the most disadvantageous position possible.

I’m talking of course about Amendment 1 on the ballot.

You should vote no. Let me explain why.

While most states are moving away from non-compete agreements in employment contracts, Georgia has kept them, though the courts have restricted them over the years to reasonable standards.

Why have the courts done this? Simply because for purposes of the contract right under the State Constitution, the parties are presumed to be of equal negotiating strength — a near necessity for an arms length transaction. But employment contracts are inherently not done between parties of equal negotiating power, which puts them in an awkward position when a contract typically presumes parties are of equal bargaining strength.

A non-compete agreement means that you as an employee agree to not work for one of your employer’s competitors for a certain amount of time after leaving your employer. It prevents you from taking trade secrets or special training to a competitor. As someone who has worked for both employers and employees in this area I have to tell you I am a big believer in non-compete agreements.

The courts in Georgia have enforced three restrictions on non-compete agreements:

  1. It must be reasonable as to time, i.e. generally no more than two years;
  2. It must be reasonable as to distance, i.e. if your employer only works in one county, it cannot prohibit you from working at the far end of the state in the same job capacity; and,
  3. It must be reasonable as to scope, i.e. it cannot prohibit you from working for a competitor if your job will be entirely different.

Those standards have worked very, very well in Georgia.

But the Chamber of Commerce wants more. Why?

Because if your employer runs afoul of the restrictions in Georgia, the entire non-compete agreement becomes null and void.

It is, under decisions of the Georgia Supreme Court, a matter of making sure both parties are on a level playing field.

Though it is technically an arms length transaction, no employee is ever on the same level as an employer. Because the party hiring always has an advantage, the knowledge that the non-compete agreement will be completely thrown out if it is not reasonable gives ample incentive to employers to not screw the employee.

So now the Georgia Chamber of Commerce, claiming the need for “job competitiveness” wants employers to be able to screw their employees and set up a very real scenario where an employee, because of the limits of his training and vocation, becomes a captive employee able to work for only one employer due to a covenant not to compete with that employer.

This is what Amendment 1 would lead to.

Here’s how it will work.

Should Amendment 1 pass, employers will now be able to draft non-compete agreements that are definitionally unreasonable.

For example — you work for a widget manufacturer in Bibb County, GA dusting widgets. The manufacturer is the sole manufacturer of widgets in Middle Georgia, but does no business outside Middle Georgia.

Under existing law, your employer could prohibit you, for two years, from working as a widget duster at any competitor in Middle Georgia or for a competitor who does substantial business in Middle Georgia.

Once Amendment 1 passes, your employer could prohibit you from working for any widget manufacturer in the United States for life doing any job at the competitor.

Frankly, if Amendment 1 passes it would set up a very real scenario of legal indentured servitude where an employee, because of limited training, is forced to work solely for one employer for the employee’s entire career unless the employee can afford to hire a lawyer and fight for his freedom to work elsewhere in a court of law.

That is not, in any way shape or form, an exaggeration. I wish that it were.

The courts will no longer be able to throw out an onerous non-compete agreement. Instead, you the employee will have to hire a lawyer to go to court and have a hearing and ask a judge to “fix” the non-compete agreement and make it reasonable.

In other words, Amendment 1 puts the entire burden of non-compete clauses on the employee and puts the entire cost on the employee. It also gives the State the power to alter a contract entered into between parties — to modify a contract previously entered into. That is a dangerous precedent to set.

This is entirely different from just throwing out the non-compete. How so? Because under contract law it is expected that most contracts, including employment contracts, are entered into in “arms length transactions” with the parties on equal footing.

As I previously mentioned, employment contracts are never really at arms length and on equal footing (the employee typically want the job more than the employer wants to hire the particular employee). Therefore, tossing, not changing, a non-compete clause puts the employer and employee on more equal contractual ground with the employer knowing that should he take advantage of the situation too much, he may lose the non-compete and see his employee go work for a competitor.

In other words, present law provides an incentive for employers to treat employees as near equal bargainers in job contracts.

Here’s the thing — the Chamber of Commerce says this will provide incentives to attract high tech jobs to Georgia. Do you really think the talent filling those jobs would be dumb enough to work for an employer in Georgia given Amendment 1?

High Tech employees are in extremely high demand. They can go to a whole host of places where non-compete clauses are either treated as Georgia presently treats them or where non-compete clauses are invalid as a matter of law in all cases.

If Georgia wants to create jobs, we need to not only have conditions right for job creators, but also for the talent to take those jobs. Amendment 1 destroys the latter conditions rendering the former moot.

20 comments

    • KingWulfgar says:

      Nice quote at the end.

      I for one am disgusted at the phrasing of the ballot question. The text for several of theses amendments on the ballot was obviously written by people who support them. I am voting NO on all of them.

  1. Kilkenny Kid says:

    Let’s see…

    1) For Karen Handel

    2) For Carol Porter

    3) Against Amendment 1

    My bet, you’ll be wrong 3 times in a row…..

    • Just because a candidate doesn’t win or an amendment passes that you don’t want doesn’t mean you’re on the wrong side. Sometimes even though you’re right, you still lose. Nathan Deal will probably win… but he’s still wrong for Georgia.

  2. Jeff says:

    and Erick proves he is just like most of us bloggers: hit or miss.

    This one is MOST DEF a hit, and I’ll be putting it out on all my networks (including personal networks).

    I may or may not say this often enough, but Good Job, Erick!

    • Jeff says:

      BTW: Yes, I admit even I can be “hit or miss”. Believe it or not, there ARE things on my site even I’m not proud of, for various reasons. (Usually because although I had a clear thought, I didn’t feel what I actually wrote clearly conveyed said thought.)

  3. NoTeabagging says:

    Thanks Erick. I agree, this is a dangerous amendment. The amendment question completely contradicts the wording “to
    make Georgia more economically competitive.” Sneaky language as I have come to expect on GA amendments.

  4. Romegaguy says:

    BREAKING NEWS — Hell just froze over. Erick and I agree on something. I’m heading back to bed to restart this day

  5. Dem in the Burbs says:

    Outstanding and thoughtful analysis – thanks!

    I find it ironic that those who rail against “activist” judges who “legislate from the bench” somehow support the right of those same judges to “blue pencil” or re-write a contract that two private parties have negotiated in an arm’s length transaction.

  6. TPNoGa says:

    Not to threadjack, but could a FPP start a thread about Amendment 2? I am curious as to what people here think.

    Looks like PP posters are pretty much in agreement on a “no” on Amendment 1

    • Lady Thinker says:

      I think we should do a post on all the amendments but it has to be quick, time is running out. What about it Charlie? Tyler? Chris?

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