Georgia Law Governs Non-Competes Even Notwithstanding Choice-of-Law Provision

Back in 2016, Edmund Burbach was living the dream, first working for six Georgia Harley-Davidson Dealerships under common ownership and then soon promoted to Chief Operating Officer.  He executed employment agreements with two of the dealerships, which included restrictive covenants (the non-competes).  During his employment and for three years thereafter , Mr. Burbach was prohibited from working for any competitor within a 120-mile radius of any of the six dealerships. These agreements included included a choice-of-law provision stating that they were to be governed by Florida law.

In 2019, Mr. Burbach left his employment and moved to another Harley-Davidson dealership located within twenty miles of one of the six dealerships that formerly employed him.  Warned that his previous employer would seek to enforce the non-compete, Mr. Burbach took no action, and his former employer sued him.  The Georgia trial court applied Florida law and, finding the non-competes reasonable, enjoined Mr. Burbach from working for a competitor within 120 miles of the six dealerships.

A Georgia court of appeals reversed.  It found that the choice-of-law clause, which it called a choice-of-forum clause, was procedural rather than substantive.  It found itself obligated to apply Georgia substantive law on non-competes, the Georgia Restrictive Covenants Act.(GRCA), OCGA § 13-8-50 et seq. Applying that law, the court of appeals found the non-competes unreasonable.

In Motorsports of Conyers, LLC v. Burbach, the Supreme Court of Georgia first noted that Georgia law generally requires courts to enforce parties' choice-of-law provisions.  However, they will not do so if prohibited by statute or if the result is "contrary to the policy or prejudicial to the interests of this state."  Unreasonable restrictive covenants are, as a matter of statutory law, contrary to public policy and unenforceable in Georgia.  

The Court then recounts the history of Georgia's statutory restrictions on non-competes.  There have been twists and turns, but the general principle abides: unreasonable restrictive covenants are general restraints of trade that contravene public policy. However, Georgia's recently revised statute on restrictive covenants is more permissive, allowing for blue-lining so that a court can edit an unreasonable non-compete to eliminate its unreasonable components.  As result, the Supreme Court issues a very complicated set of instructions for the trial court on remand:

[T]he trial court must first apply the GRCA to determine whether the restrictive covenants in Burbach's employment agreements comply with it. If the covenants are reasonable under Georgia law, . . . the court must then apply the parties' chosen law—Florida law—to determine their ultimate enforceability.  If the covenants as written do not comply with the GRCA, then enforcing them would violate Georgia public policy, and so the court may not apply foreign law to enforce them. Instead, Georgia law would govern the covenants, and so the trial court would apply our law, including the GRCA's blue-penciling provision, to determine whether the restrictive covenants may be enforced in part.

The Supreme Court of Georgia decided this case in September 2023.  It took until January, 2024, for the intermediate appellate court to vacate its 2022 decision and remand the case to the trial court to reconsider in accordance with the Supreme Court's instructions.  I wonder what effect that trial court can give to the non-competes given that their three-year term expired in 2022.  Mr. Burbach's LinkedIn page indicates that he has been employed in Florida since 2021.