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Nebraska Non-Compete Agreement Template

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A Nebraska non-compete agreement is a legal contract executed by two (2) parties whereby one party wishes to prevent the other from going into direct competition with them after their relationship is terminated. In Nebraska, non-competes are typically viewed as an unnecessary restraint on trade unless they are equitable for both parties.

Courts will consider different aspects of the case depending on how the contract was implemented. NCAs can be applied during the sale of a business as well as in an employer-employee situation, but the latter is more heavily scrutinized.

Contents

Enforceability in Nebraska

Non-compete agreements ancillary to an employment contract are enforceable in Nebraska. Courts are more lenient and generally more prepared to enforce non-competes in the context of a business sale rather than an employer-employee relationship.[1] However, if the employer is protecting a legitimate business interest, rather than preventing ordinary competition, a non-compete can be used against an employee.[2]

When it IS Enforceable

  • Reasonable. Non-competes are only considered valid if they are equitable. In order to determine reasonableness, courts of law will check to make sure the following statements are true:
    • The agreement is not injurious to the general public.
    • The restrictions are only as far-reaching as necessary to protect the employer’s goodwill, customer contacts, trade secrets, or other confidential information.
    • The restrictions do not create an undue hardship for the employee.[3]
  • Business sales. When applying non-competes to the sale of a business, the agreement must be reasonable in character, space, and time to safeguard the goodwill and other business interests of the buyer.[4]
  • Customer contact. Employers can prohibit an employee from engaging with customers and clients, but only those customers/clients with whom the employee had direct personal contact.[5]

When it’s NOT Enforceable

  • Attorneys. Non-compete agreements that prohibit a lawyer from practicing law are unenforceable unless the agreement pertains to benefits for the attorney’s retirement.[6]

Maximum Time Period

The duration of a non-compete agreement must not be more restrictive than is needed to protect the business interests of the employer.[4] The following factors will be examined by a court of law when determining the reasonability of an NCAs time period:

  • “The degree of inequality in bargaining power.
  • The risk of the covenantee losing customers.
  • The extent of respective participation by the parties in securing and retaining customers
  • The good faith of the covenantee.
  • The existence of sources or general knowledge pertaining to the identity of customers.
  • The nature and extent of the business position held by the covenantor.
  • The covenantor’s training, health, education, and needs of his family.
  • The current conditions of employment.
  • The necessity of the covenantor changing his calling or residence.
  • The correspondence of the restraint with the need for protecting the legitimate interests of the covenantee.”[7]

When it comes to restrictive agreements pertaining to confidential information learned by the employee, the employer cannot establish a time period that lasts longer than the usefulness of the information held by the employee.[8]

Geographical Area

Nebraska courts consider the same factors listed above for time restrictions as they do for geographical scope. If the non-compete agreement in question has been executed for the purposes of prohibiting contact with the employer’s customers/clients, it can only cover the areas where the employee performed their duties.[3] More specifically, the agreement can only include those customers and clients that the employee was in contact with personally.[5]

Consideration

In order for a non-compete agreement to be fair for both parties, the employer may need to provide consideration to the employee. In general, a court of law will look favorably upon a non-compete if there is consideration “provided” that “is some benefit to one of the parties or a detriment to the other.”[9]

An offer of employment at the time of signing a non-compete should be sufficient consideration. Continued employment will likely be deemed adequate consideration as well.[10]


Sources

  1. Chambers-Dobson, Inc. v. Squier, 238 Neb. 748, 755-56, 472 N.W.2d 391, 397 (Neb. 1991)
  2. Moore v. Eggers Consulting Co., 252 Neb. 396, 401, 562 N.W.2d 534, 539 (Neb. 1997)
  3. Polly v. Ray D. Hilderman Co., 225 Neb. 662, 407 N.W.2d 751 (Neb. 1987)
  4. H R Block Tax Servs. v. Circle a Enters, 269 Neb. 411, 693 N.W.2d 548 (Neb. 2005)
  5. Professional Bus. Servs. v. Rosno, 268 Neb. 99, 680 N.W.2d 176 (Neb. 2004)
  6. Neb. Rules of Prof. Cond. § 3-505.6
  7. Philip G. Johnson Co. v. Salmen, 211 Neb. 123, 128, 317 N.W.2d 900, 904 (Neb. 1982)
  8. Brockley v. Lozier Corp., 241 Neb. 449, 461-62, 488 N.W.2d 556, 564 (Neb. 1992)
  9. Aon Consulting v. Midlands Fin, 275 Neb. 642, 645, 748 N.W.2d 626, 638-39 (Neb. 2008)
  10. Securities Acceptance Corp. v. Brown, 171 Neb. 406, 415-16, 106 N.W.2d 456, 462-63 (Neb. 1960)
  11. NRS § 87-404(2)
  12. Huff v. Swartz, 258 Neb. 820, 825, 606 N.W.2d 461, 466 (Neb. 2000)

Related Forms (1)

Nebraska Non-Disclosure Agreement – Prohibits an individual from misusing or disseminating an entity’s trade secrets and other confidential information.

Download: PDF, Word (.docx), OpenDocument


Frequently Asked Questions

Is blue penciling allowed in Nebraska?

No, Nebraska courts will not modify or blue pencil non-compete agreements. Nebraska has adopted a red pencil approach which means courts of law may consider an entire agreement void if they find a restrictive provision to be overbearing and unreasonable.[4]

The state’s Franchise Practices Act has been amended to allow courts to reform a non-compete ancillary to a franchise agreement if it improves validity and reasonability.[11]

What is a tortious interference claim?

A tortious interference claim is a legal action against an individual who has purposefully interfered with an entity’s business relationships through blackmailing, obstruction, threats, or other methods which negatively affect the employer’s economic interests. This type of claim can be used by employer’s to enforce non-compete agreements against former employees. The employer must prove that the employee was aware of the existing or potential relationship (with the client, supplier, contractor, etc.) and they intentionally meddled with that relationship which caused real damages to the employer.[12]