A Nevada non-compete agreement is a written contract imposed on an employee to prevent them from working with a competitor or starting a business similar to that of their former employer. Employers must be mindful of the reasonableness of a non-compete’s restrictions as a court of law may view it as a restraint on trade if it unjustly impedes the employee’s livelihood.
When deciding whether or not to enforce a non-compete agreement, Nevada courts must determine whether or not the employer is legitimately trying to protect its operations. There are a number of factors to consider, as detailed below, and courts will use state statutes and previous case law to appropriately regulate non-competes.
Non-compete agreements are enforceable in Nevada if they prohibit an employee from working for the employer’s competitors or in the same industry as the employer or from using any proprietary knowledge gained throughout the course of employment.
- Limitations. To be enforceable, a non-compete must adhere to the following requirements:
- The restrictions are only as broad as is necessary to safeguard the employer’s legitimate business interests. (This includes duration and geographical scope, the reasonableness of which is determined on a case-by-case basis.)
- The restrictions do not create hardship for the employee.
- The employer provides sufficient consideration for the employee.
- The consideration is adequate in comparison to the restrictions placed on the employee.
- Business sale. Non-compete agreements may be implemented ancillary to the sale of a business where the buyer wishes to prohibit the seller from competing with them within a specified geographical area and time period.
- Unsolicited customers. A non-compete agreement will be unenforceable if the employer is trying to prohibit the employee from performing services for former customers who left the employer voluntarily without solicitation by the employee. If the employer files an action under these circumstances, attorneys’ fees and costs must be distributed to the employee.
- Hourly wage workers. Employers are prohibited from establishing non-compete covenants against employees paid by the hour. An employee in this situation will be awarded attorneys’ fees and costs if an action is brought against them to enforce the agreement.
- Proposed operations. A non-compete that includes a geographical area where the employer intends on establishing business facilities or relationships (as opposed to current, provable operations) is not enforceable.
As mentioned above, a non-compete agreement’s time restriction must be reasonable, and this determination is made by courts depending on other factors of the case. In one case, a 1-year limitation within the city of Reno was imposed in a non-compete agreement and was considered reasonable. In another, an employer established a 2-year non-compete agreement with a reasonable geographical scope and the courts decided this was acceptable.
Geographical scope is another type of restriction that courts will consider in relation to other aspects of the case. In general, they’re looking to see if the limitation protects the employer’s business but doesn’t hinder the employee’s ability to find gainful employment. If the employer can prove that the proposed restricted area is where they have goodwill, a customer base, or offices/facilities, it’s likely the court will consider this acceptable.
A non-compete contract needs to include a benefit for the employee as well as the employer, which is known as consideration. In Nevada, courts of law deem an offer of employment or continued employment to be adequate consideration.
- NRS § 613.195(8)(b)
- NRS § 613.200(4)
- NRS § 613.195(1)
- Camco, Inc. v. Baker, 113 Nev. 512, 936 P.2d 829 (Nev. 1997)
- NRS § 598A.040(5)(a)
- NRS § 613.195(2)
- NRS § 613.195(3)
- NRS § 613.195(7)
- Hansen v. Edwards, 83 Nev. 189, 426 P.2d 792 (Nev. 1967)
- Ellis v. McDaniel, 95 Nev. 455, 596 P.2d 222 (Nev. 1979)
- NRS § 613.195(6)
- NRS § 613.195(5)
Nevada Non-Disclosure Agreement – A contract that aims to prevent the unwanted use or sharing of an entity’s confidential information.