Howard Schultz & Associates of Southeast, Inc. v. Broniec
236 S.E.2d 265, 1977 Ga. LEXIS 855, 239 Ga. 181 (1977)
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Rule of Law:
In Georgia, a court will not apply the 'blue-pencil theory' of severability to an overly broad covenant not to compete in an employment agreement; if any part of the covenant is unreasonable, the entire covenant is unenforceable. Additionally, a nondisclosure covenant lacking a time limitation is also unenforceable for being unreasonable.
Facts:
- On November 20, 1972, Frank D. Broniec entered into an independent contractor agreement with Edward C. Aubitz to work as an auditor for Aubitz and his principal, Howard Schultz and Associates, Inc.
- The agreement contained a covenant not to compete, prohibiting Broniec for two years after termination from engaging in any competitive business activity, in any capacity whatsoever, within any area where the principal or associate conducted business.
- The agreement also included a covenant against disclosure of confidential information, which did not contain any time limitation.
- Between 1974 and 1975, the agreement was assigned from Aubitz to other parties, ultimately ending with the plaintiff-employer, Howard Schultz & Associates of the Southeast.
- In March 1976, Broniec terminated his employment.
Procedural Posture:
- Howard Schultz & Associates of the Southeast (employer) filed a complaint against its former employee, Frank D. Broniec, in a Georgia trial court.
- The employer sought an injunction to enforce the covenant not to compete and the nondisclosure clause from the employment agreement.
- After a hearing, the trial court dismissed the complaint, ruling that the restrictive provisions of the contract were unenforceable.
- The employer, as appellant, appealed the trial court's dismissal to the Supreme Court of Georgia.
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Issue:
Does Georgia law permit a court to modify or 'blue-pencil' an overly broad and unreasonable covenant not to compete within an employment agreement to make it enforceable?
Opinions:
Majority - Hill, Justice
No, Georgia law does not permit a court to modify an overly broad covenant not to compete to make it enforceable. The covenant in this case is unenforceable because it is unreasonable in three ways: 1) its territorial restriction covers the employer's entire six-state business area without justification, representing a bald attempt to prevent competition; 2) its prohibition on the employee working for a competitor 'in any capacity' is a greater limitation than necessary to protect the employer; and 3) it fails to specify with particularity the business activities the employee is forbidden from performing. The court explicitly reaffirmed its holding in Rita Personnel Services v. Kot, rejecting the 'blue-pencil theory' of severability for employment contracts. Adopting this theory would encourage employers to draft overly broad covenants, knowing courts would rewrite them if challenged, which unfairly deters employee competition. The nondisclosure covenant is also unenforceable because it contains no time limitation, making it unreasonable in scope.
Analysis:
This decision solidifies Georgia's strict, 'all-or-nothing' approach to restrictive covenants in employment contracts. By reaffirming its rejection of the 'blue-pencil' doctrine, the court places the burden of drafting reasonable and narrowly tailored covenants squarely on employers. The ruling discourages the use of overly broad, in terrorem clauses, thereby protecting employee mobility. This case establishes a clear precedent that if a non-compete is unreasonable in territory, scope of activity, or capacity of future employment, it will be voided entirely, not judicially reformed.
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