Can an Employer Enforce a Covenant Requiring an Employee to Devote “Full-Time” to Their Work?

In Early v. MiMedx, Inc., Case No. A14A2141 (decided February 10, 2015), the Georgia Court of Appeals addressed the enforceability of a covenant requiring a person to “devote her full working time” to the performance of her duties. The decision raises interesting issues about the enforceability of such agreements.

MiMedx entered into a consulting agreement with another company, ISE, that provided that Ms. Early, the founder, and president of ISE, would “devote her full working time (not less than forty (40) hours per week) to the performance of Consultant’s duties thereunder.” Opinion, p. 3. After MiMedx had terminated the consulting agreement, the parties became embroiled in litigation. In one of the claims, MiMedx claimed that ISE had breached the consulting agreement because Ms. Early had not devoted her full working time to the performance of the consulting duties to MiMedx.

Because the agreement pre-dated the effective date of a collection of statutes adopted in Georgia to govern the enforcement of noncompetition covenants, the Court applied pre-existing case law. In applying that law, the Court found that the agreement was an unenforceable restraint of trade. The Court noted that the parties agreed that a contract prohibited Ms. Early from doing any work other than work related to MiMedx, including babysitting on a weekend or working in a bookstore. Opinion, p. 11 and n.10. The Court held that because of the full-working time provision contained no limitation as to its scope or territorial reach, it would fail under any level of scrutiny that might be applied. Opinion, pp. 16-17.

How such a covenant might fare under the Georgia statutes that govern restrictive covenants entered into after May 2011 is not addressed by the Opinion. Prior to the adoption of those statutes, Georgia case law imposed very strict limits on restrictive employment covenants. O.C.G.A. § 13-8-56(4) now provides that a restriction during the term of employment “shall not be considered unreasonable because it lacks any specific limitation upon scope of activity, duration, or geographic area so long as it promotes or protects the purpose or subject matter of the agreement or relationship or deters any potential conflict of interest.” Therefore, scope and geographic limits are no longer essential to an enforceable “full-time work” covenant.  Nevertheless, the Early decision may lead employers to take a closer look at “full-working-time” covenants. A drafter of a “full time” employment covenant will need to make sure that its scope is limited to serve the purposes enumerated in O.C.G.A. § 13-8-56(4).

The Opinion is available at https://efast.gaappeals.us/download?filingId=741387b8-2a03-4090-9dd2-9dc7fc6afb1e

For more information on this topic, contact your Appellate Counsel at Smith, Gambrell & Russell.