Labor and Employment Law - W. Melvin Haas Iii, William M. Clifton Iii, W. Jonathan Martin Ii, and Glen R. Fagan

• Jurisdiction: Georgia,United States
• Publication year: 2009
• Citation: Vol. 61 No. 1

Labor and Employment Lawby W. Melvin Haas III^* William M. Clifton III^** W. Jonathan Martin If^*** and Glen R. Fagan^****

I. Introduction

This Article surveys recent developments in the state statutory and common law that affect labor and employment relations of Georgia employers. Accordingly, it surveys published decisions interpreting

Georgia law from June 1, 2008 to May 31, 2009.¹ This Article also includes highlights of certain revisions to the Official Code of Georgia Annotated (O.C.G.A.).²

II. Recent Legislation

A. Modification of Covenants Not to Compete

On April 29, 2009, Georgia Governor Sonny Perdue signed into law House Bill 173,³ which amends existing law regarding employment contracts that restrict competition,⁴ but this legislation will not become effective unless Georgia passes an amendment to the Georgia Constitu-tion.⁵ House Bill 173, if it becomes effective, would allow a court to modify and limit the relief of otherwise unenforceable covenants rather than invalidate them entirely.⁶ It would also provide specific guidelines for determining such covenants' enforceability.⁷ Georgia law already recognizes covenants not to compete in employment contracts, but under current law, if any covenant in a given contract is unreasonable, then all remaining covenants in the same contract are unenforceable.⁸

In 1991 the Georgia Supreme Court invalidated a statute that allowed judicial modification of covenants not to compete⁹ on the ground that the statute defeated or lessened competition or encouraged monopolies in violation of the Georgia Constitution.¹⁰ To prevent House Bill 173 from encountering similar constitutional problems, Georgia must hold a referendum in 2010 to amend its constitution to provide for the enforcement of covenants in commercial contracts that limit competi-tion.¹¹ If Georgia ratifies this constitutional amendment, then House Bill 173 will become effective the following day; otherwise, House Bill 173 will be automatically repealed.¹²

III. Wrongful Termination

A. Overview

At-will employment refers to employment that either an employer or an employee may terminate at any time without cause.¹³ Though the employment-at-will doctrine is weakening in many jurisdictions,¹⁴ Georgia law presumes that all employment is at-will unless there is a contractual or a statutory exception.¹⁵ In particular, O.C.G.A. Sec. 34-71¹⁶ provides that an "indefinite hiring" is at-will employment.¹⁷ Indefinite hiring includes "permanent employment," "employment for life," and "employment until retirement."¹⁸ Reference to an annual salary does not specify a definite period of employment.¹⁹ If an employment contract specifies a definite period of employment, any employment beyond that definite period is employment at-will.²⁰

Generally, the discharge of at-will employees is not actionable²¹ regardless of the employer's motives or reasons.²² An employer's oral promise not to discharge or treat adversely an at-will employee does not modify the at-will relationship between employer and employee because oral promises are generally not enforceable by at-will employees.²³ When there is no written contract of employment, there is no cause of action against the employer for alleged wrongful termination.²⁴ When there is an at-will-employment contract, the terms of the employment contract are generally unenforceable.²⁵

During the survey period, the United States District Court for the Northern District of Georgia held in Soloski v. Adams²⁶ that under Georgia's at-will-employment doctrine, an employer's oral promise not to find an at-will employee in violation of a sexual harassment policy in exchange for that employee's resignation is unenforceable.²⁷ In Soloski a female University of Georgia employee alleged that the plaintiff, the dean of the University's Grady College of Journalism, sexually harassed her verbally. The plaintiff did not deny making the comments but denied that they constituted sexual harassment.²⁸ The plaintiff claimed that during an investigation by the University's Office of Legal Affairs (OLA), he and the provost agreed orally that if the plaintiff resigned, the University would not find him in violation of the sexual harassment policy, and the OLA would only write positive things about him. The plaintiff resigned, and two days later the OLA officially found that the plaintiff had violated the sexual harassment policy.²⁹ Among other things, the plaintiffclaimed that the provost and others committed fraud by making a promise not to find him in violation of the sexual harassment policy in exchange for his resignation without the intention of ever following through with that promise.³⁰ Under Georgia law, "'fraud can be predicated on a misrepresentation [about] a future event where the defendant knows [such] event will not take place, [but] fraud cannot be predicated on a promise which is unenforceable at the time it is made.'"³¹

Among the issues before the court was whether the provost's promise, if actually made,³² would have been enforceable at the time it was made.³³ The court held that "oral promises by employers are not enforceable by at-will employees."³⁴ Because the plaintiff's employment contract specifically provided that he held his "administrative title and position at the pleasure of the President," his employment was at-will under Georgia law.³⁵ Because the provost could have "terminate[d the] plaintiff's employment as dean for any reason at any time, any terms of the agreement reached between [the] plaintiff and [the] defendants not reduced to writing were unenforceable at the time they were made."³⁶ Therefore, the charge of fraud could not be supported by the alleged oral ₃₇ promise.

B. Exceptions to At-Will Employment

The statute creating the employment-at-will doctrine contains a significant exception: the parties may contract otherwise.³⁸ During the survey period, the Georgia Court of Appeals in Avion Systems, Inc. v. Thompson³⁹ held that an employee's covenant to work for at least twelve months was enforceable, even though the employment was generally at-will.⁴⁰ In Avion the employer claimed that its former employee violated a provision in the employment contract by terminating her employment before the required term of one year. The introductory paragraph of the contract provided that the employee was a "full time employee at will," but the body of the contract provided that the employee agreed to provide services "for a minimum of twelve (12) months."⁴¹ Among the issues before the court was whether the agreement to provide services for twelve months was invalid because it conflicted with the general provision for employment at-will.⁴² The court of appeals held the agreement was valid.⁴³ Relying on the general rule of contract construction that "'when a [contractual] provision specifically addresses the issue in question, it prevails over any conflicting general language,'" the court reasoned that the specific provision for a minimum of twelve months service prevailed over the conflicting general at-will language.⁴⁴ The court reasoned that this result effectuated the intent of the parties, upheld the whole contract and each of its parts, and was consistent with common practice.⁴⁵

C. Continued Employment as Consideration Supporting Other Agreements

During the survey period, the United States District Court for the Northern District of Georgia held in Dixie Homecrafters, Inc. v. Homecrafters of America, LLC⁴⁶ that under Georgia law, a forum selection clause in a nondisclosure agreement is enforceable against at-will employees, even though the only consideration is continued employment.⁴⁷ In Dixie Homecrafters, the plaintiff business organizations, citizens of Georgia, sued several business and individual defendants, alleging various torts and unlawful competition.⁴⁸ Six of the individual defendants were former employees in plaintiff s Pennsylvania office,⁴⁹ and all six testified individually that they were not residents of Georgia.⁵⁰ Three of these defendants had signed a nondisclosure agreement with the plaintiff.⁵¹ Paragraph 6.1 of that agreement provided that

This Agreement and any disputes arising under or related thereto (whether for breach of contract, tortious conduct, or otherwise) shall be governed by the laws of the State of Georgia, without reference to its conflict of law principles. Any legal actions, suits or proceedings arising out of this Agreement (whether for breach of contract, tortious conduct, or otherwise) shall be brought exclusively in the state or federal courts

of Georgia, and the parties to this Agreement hereby accept and submit to the personal jurisdiction of these Georgia courts with respect to any legal actions, suits or proceedings arising out of this Agreement.⁵²

The defendants claimed that Georgia lacked personal jurisdiction over them and argued that the nondisclosure agreement was invalid because there was no additional consideration, which Pennsylvania law would require.⁵³ The district court applied Georgia's choice of law rule and held that, unlike Pennsylvania law, Georgia law "permits the signing of a non-disclosure or non-compete agreement for at-will employees with no additional consideration other than continued employment."⁵⁴ Accordingly, it found the nondisclosure agreement valid and concluded that the defendants who signed the agreement had contractually consented to Georgia's exercise of personal jurisdiction over them.⁵⁵

IV. Negligent Hiring or Retention

A. Overview

Under O.C.G.A. Sec. 34-7-20,⁵⁶ "[t]he employer is bound to exercise ordinary care in the selection of employees and not to retain them after knowledge of incompetency."⁵⁷ The Georgia Court of Appeals has held that this statute imposes a duty on the employer to "warn other employees of dangers incident to employment that 'the employer knows or ought to know but which are unknown to the employee.'"⁵⁸ For an employee to sustain an action for negligent hiring or...