Did you sign a non-compete agreement at some point during your employment in Nevada and need to know if it’s enforceable or how it might affect your employment moving forward? Or is your employer is asking you to sign a non-compete agreement now?
You can request a review of your non-compete agreement from Matthew Piccolo, an attorney licensed in Nevada and Utah, by submitting your information at the link below. The cost for a consultation is $179, which includes a review of your agreement and answering the questions you have about it and your current situation. You can submit a request for a consultation at the bottom of this page.
The rest of this article describes what makes a non-compete agreement enforceable and how the courts interpret non-compete agreements. We look forward to assisting you with your non-compete agreement.
Is My Non-Compete Agreement Legal and Enforceable?
Nevada law outlines broad guidelines for determining whether or not a non-compete is enforceable. Unfortunately, this law is quite vague and open to interpretation, but we’ll explain what it means the best we can.
The law states that to be legal and enforceable a non-compete agreement must follow these guidelines:
- The non-compete must be “supported by valuable consideration.” The law doesn’t define what “valuable consideration” means, but before 2017 the Nevada Supreme Court determined that continued employment after signing a non-compete counts as consideration. (See Camco, Inc. v. Baker, 113 Nev. 512, 517 (1997)). In other words, you have received something of value–the ability to continue working–and your employer has received something of value–your agreement not to compete after leaving. If, however, your employer asks you to sign a non-compete right before you leave, then it would need to provide some other value in exchange for your agreeing not to compete. Today, continued employment may or may not still count as valuable consideration.
- The non-compete must not “impose any restraint that is greater than is required for the protection of the employer for whose benefit the restraint is imposed.” This requirement is not defined in the law but essentially means that your employer can’t restrict your post-employment options excessively–it can only restrict action that is necessary to protect its interests. The courts have said that duration and geographical scope are important factors to consider. (See Shores v. Glob. Experience Specialists, Inc., 134 Nev. Adv. Op. 61 (2018); Golden Rd. Motor Inn, Inc. v. Islam, 132 Nev. Adv. Op. 49 (2016)). Specifically, the geographical scope should be limited to areas where “the employer has established customer contacts and good will.” (See Shores). For example, a nationwide restriction is unreasonable when an employer operates in only 33 states, (See Shores), and restricting an employee from operating within 50 miles of any area that the employer is targeting for expansion is unreasonable because the designated area is too speculative and broad. (See Camco). In another case, an agreement that restricted a casino employee from working in any position at any casino within 150 miles imposed an undue hardship on the employee because it didn’t limit the restriction to the type of work she performed at the casino. (See Golden Rd. Motor Inn, Inc. v. Islam).
- The non-compete must not “impose any undue hardship on the employee.” The law doesn’t define “undue hardship,” so this factor is also open to interpretation. In one case, the courts decided that a five-year restriction imposed an undue hardship on the employee and wasn’t necessary to protect the employer’s interests. (See Jones v. Deeter, 112 Nev. 291, 296 (1996)).
- The non-compete must “[i]mpose restrictions that are appropriate in relation to the valuable consideration supporting the noncompetition covenant.” Once again, there is no definition for this factor, but, in essence, if an employer provides greater value in exchange for signing a non-compete, then it can impose greater restrictions. For example, if an employer offers an extra sum of money to sign a non-compete, then it would likely be allowed to impose greater restrictions. However, if an employer terminates you for no good reason just months after signing a non-compete, then the restrictions might not be enforceable because you weren’t able to enjoy continued employment for very long.
Keep in mind that most of the cases I mentioned were decided before the Nevada non-compete law was added in 2017 and went into effect on June 3, 2017, so the courts could interpret the enforcement of non-competes a little differently based on the new law.
What if a Judge Says a Non-Compete Violates the Law?
If an employer attempts to enforce a non-competition agreement in court and the judge decides that the agreement does not meet those four requirements, then the agreement is void and unenforceable. However, that won’t necessarily be the end of the non-compete because Nevada law doesn’t tell the courts to rip up an unenforceable non-compete; rather, the courts are supposed to revise the agreement in a way that makes it reasonable and enforceable.
So if there’s any way to make the non-compete enforceable, then the courts are supposed to cross out the unenforceable terms and change them to be enforceable. This approach is sometimes called the “blue pencil doctrine” and is one the Nevada courts avoided doing, but now the law requires them to do it.
One more note: in some cases, a court could determine that a non-compete is “unconscionable,” meaning that either the procedure used for requiring the employee to sign the agreement was unfair or the substance (i.e. the terms) of the agreement are overly harsh or one-sided. If an agreement is unconscionable, then the judge could revise it or declare it to be unenforceable entirely.
What if the Employer’s Customer or Client Wants to Hire Me?
The law specifically states that an employer may not restrict a former employee from providing services to the employer’s customers or clients if:
- The employee doesn’t solicit the customer or client;
- The customer or client voluntarily leaves the employer and seeks services from the employee; and
- The employee complies with the non-compete’s other limitations (time, geographical area, and scope) that don’t address working with former customers or clients who voluntarily seek the employee’s services.
To re-phrase, if you comply with the non-compete in other ways, then you’re likely allowed to take on your employer’s clients if they voluntarily seek your services without you soliciting them. Of course, this part only addresses the employer’s former customers or clients while the employee works there, not other potential customers or clients who are in the restricted area and might voluntarily contact the employee. The non-compete may still restrict you from serving those people.
What if I’m an Hourly Worker Rather than a Salaried Worker?
The Legislature passed a law that went into effect on October 1, 2021 that prohibits employers from applying a non-compete to an employee “who is paid solely on an hourly wage basis, exclusive of any tips or gratuities.” It’s unclear whether this law applies to non-competes signed before the effective date.
What if I’m Laid Off–Does the Non-Compete Still Apply?
If an employee is laid off because of a reduction in force or restructuring, then a non-compete is only enforceable while the employer is paying the employee’s salary and benefits or severance pay.
We Can Help Protect Your Rights by Reviewing Your Non-compete Agreement
As you can see, the law regarding non-compete agreements is complex and often vague. We have not provided specific legal advice here but a basic summary of the law, which will apply differently depending on a person’s circumstances and any agreements you have signed with your employer.
If you have questions about a non-compete, for a reasonable fee we can review it for you and help determine if it is legal and enforceable and how it might affect your ability to earn a living. We can also offer advice on whether to sign a non-compete or what to do, or not do, if you’ve already signed one.
If you would like us to review your non-compete agreement, then submit your information using the form below, and submit your agreement using the upload function below that.
We look forward to assisting you with your non-compete agreement.