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NON- COMPETITION CLAUSES IN NEVADA.
02/06/2019

In Nevada, the law prohibits a person, association, company or corporation, or agent or officer thereof, from preventing any person who for any cause left or was discharged from their employ from obtaining employment elsewhere in this State. However, a person, association, company or corporation, or agent or officer thereof, was not prohibited from negotiating, executing and enforcing an agreement with an employee which, upon termination of employment, prohibited the former employee from pursuing a similar vocation in competition with or becoming employed by a competitor of the former employer. These agreements are know as "Non- Competition" covenants and are typically found in employment agreements. In 2017, Nevada modified its statues when dealing with these "Non- Competition" covenants wherein additional requirements governing non-competition covenants were added under the new laws. A non-competition covenant is now void and unenforceable unless the non-competition covenant:
     (a) Is supported by valuable consideration;
     (b) Does not impose any restraint that is greater than is required for the protection of the employer for whose benefit the restraint is imposed;
     (c) Does not impose any undue hardship on the employee; and
     (d) Imposes restrictions that are appropriate in relation to the valuable consideration supporting the non-competition covenant.

In addition, and just as important a change, the new law further provides that a non-competition covenant may not restrict a former employee of an employer from providing service to a former customer or client if:
     (1) The former employee did not solicit the former customer or client;
     (2) The customer or client voluntarily chose to leave and seek the services of the former employee; and
     (3) The former employee is otherwise complying with the non-competition covenant.

Furthermore, the new law also provides that if an employee is terminated because of a reduction in force, reorganization or similar restructuring, a non-competition covenant is only enforceable during the time in which the employer is paying the employee’s salary, benefits or equivalent compensation. Thus, depending on the specific factual circumstances of a case, an employer's non-competition covenant may lose all meaning.

Finally, many courts over the year's have invalidated non-competition covenants for being too long in time and/or too broad in geographic scope. Nevada law now provides that if an employer brings an action to enforce a non-competition covenant and the court finds the covenant contains limitations that are not reasonable and impose a greater restraint than is necessary, the court shall revise the covenant to the extent necessary and enforce the covenant as revised. Such revisions must cause the limitations contained in the covenant as to time, geographical area and scope of activity to be restrained to be reasonable and to impose a restraint that is not greater than is necessary for the protection of the employer for whose benefit the restraint is imposed.

Drafting non-competition covenants can become technical. The attorneys at our firm can consult with you to provide the legal advice, guidance and expertise necessary to assist you with your business.

For more information contact us at office@fdlawlv.com.

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