Business Law 11th Edition by Kenneth Clarkson,Roger LeRoy Miller,Gaylord Jentz,Frank Cross

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Stultz v. Safety and Compliance Management, Inc.
Court of Appeals of Georgia, 2007. 285 Ga.App. 799, 648 S.E.2d 129.
• Background and Facts Safety and Compliance Management, Inc. (S C), in Rossville, Georgia, provides alcohol- and drug-testing services in multiple states. In February 2002, S C hired Angela Burgess. Her job duties included providing customer service, ensuring that specimens were prop- erly retrieved from clients and transported to the testing lab, contacting clients, and managing the office. Burgess signed a covenant not to compete "in any area of business conducted by Safety and Compliance Management... for a two-year period... beginning at the termination of employment." In May 2004, Burgess quit her job to work at Rossville Medical Center (RMC) as a medical assistant. RMC provides medical services, including occupational medicine, medical physicals, and workers' compensation injury treatment. RMC also offers alcohol- and drug-testing services. Burgess's duties included setting patient appointments, taking patient medical histories, checking vital signs, performing urinalysis testing, administering injections, conducting alcohol breath tests, and collecting specimens for drug testing. S C filed a suit in a Georgia state court against Burgess and others (including a defendant named Stultz), alleging, among other things, that she had violated the noncompete agreement. The court issued a summary judgment in S C's favor. Burgess appealed to a state intermediate appellate court.
BERNES, Judge.
* * * *
Restrictive covenants that are ancillary to an employment contract are subject to strict scrutiny and will be voided by Georgia courts if they impose an unreasonable restraint on trade. Whether the restraint imposed by the employment contract is reasonable is a question of law for determination by the court, which considers the nature and extent of the trade or business, the situation of the parties, and all the other circumstances. A three-element test of duration, territorial coverage, and scope of activity has evolved as a helpful tool in examining the reasonableness of the particular factual setting to which it is applied. * * * [Emphasis added.]
* * * Burgess contends that the trial court erred in concluding that the non-competition agreement was reasonable as to the scope of the activity prohibited.* * *
The non-competition agreement provides that Burgess "will not compete * * * in any area of business conducted by [S C]." Although the next sentence of the agreement provides some particularity by referring to the solicitation of existing accounts, the agreement, when read as a whole, plainly is intended to prevent any type of competing activity whatsoever, with the reference to solicitation merely being illustrative of one type of activity that is prohibited. * * * Thus, when properly construed, the non-competition agreement prohibits, without qualification, Burgess from competing in any area of business conducted by S C.
Such a prohibition clearly is unreasonable * * *. A non-competition covenant which prohibits an employee from working for a competitor in any capacity, that is, a covenant which fails to specify with particularity the activities which the employee is prohibited from performing, is too broad and indefinite to be enforceable. And, Georgia courts have interpreted contractual language similar to that found in the present case as essentially prohibiting an employee from working for a competitor in any capacity whatsoever.* * * In light of this case law, we conclude that the noncompetition agreement imposes a greater limitation upon Burgess than is necessary for the protection of S C and therefore is unenforceable. [Emphasis added.]
It is true, as S C maintains, that there are factual circumstances where an otherwise questionable restrictive covenant that prohibits working for a competitor will be upheld as reasonable. More specifically, a suspect restriction upon the scope of activity may nevertheless be upheld when the underlying facts reflect that the contracting party was the very heart and soul of the business whose departure effectively brought the business to a standstill. Moreover, the "heart and soul" exception is applicable only where the restrictive covenant otherwise applies to a very restricted territory and for a short period of time.
S C, however, has failed to allege or present evidence showing that Burgess was the heart and soul of its alcohol and drug testing business. Although Burgess was a major player in S C's business, she was, when all is said and done, an employee. Her departure may have hurt S C; but it did not bring the business to a halt. It cannot be said, therefore, that Burgess was the heart and soul of the business.
• Decision and Remedy The court reversed the judgment of the lower court. The state intermediate appellate court concluded that the covenant not to compete that Burgess signed "is unreasonable as to the scope of the activity prohibited" because "it is overly broad and indefinite." Thus, the covenant was not enforceable.
• The Ethical Dimension To determine the enforceability of a covenant not to compete, the courts balance the rights of an employer against those of a former employee. What are these rights How did S C's covenant not to compete tip the balance in the employer's favor
• The Global Dimension Should an employer be permitted to restrict a former employee from engaging in a competing business on a global level Why or why not