Search form

New Law Brings Changes to Nevada’s Non-Compete Law

By Joshua A. Sliker
  • June 29, 2017

Over the last year, Nevada’s non-compete law has undergone a number of changes. The latest is a new law setting forth a new standard by which non-compete agreements are to be evaluated.

Golden Road

Nearly a year ago, on July 21, 2016, the Nevada Supreme Court issued its decision in Golden Road Motor Inn, Inc. d/b/a Atlantis Casino Resort v. Islam and Grand Sierra Resort, 132 Nev. __, 376 P.3d 151 (2016). In Golden Road, the Court confirmed that non-compete agreements that “extend[] beyond what is necessary” to protect the former employer’s interests are unreasonable and unenforceable.

The Nevada Supreme Court also eliminated the “blue pencil” doctrine that historically allowed trial courts to edit the content of a non-compete agreement, turning an unenforceable provision into an enforceable one. The Supreme Court held that lower courts are in the business of interpreting contracts, not writing them.

New Law

In response to Golden Road, the Nevada Legislature passed Assembly Bill 276, amending Chapter 613 of the Nevada Revised Statutes. It was signed into law by Governor Brian Sandoval on June 3, 2017.

A.B. 276 is not a codification of Golden Road or the Nevada Supreme Court’s prior decisions regarding non-compete agreements. Rather, A.B. 276 sets forth a new standard by which non-compete agreements are to be evaluated.

These changes include:

1. A non-compete agreement is void and unenforceable in its entirety unless:

  • It is supported by valuable consideration;
  • It does not impose a restraint that is greater than is required for the protection of the employer;
  • It does not impose an undue hardship on the employee; and
  • It imposes only those restrictions that are appropriate in light of the valuable consideration given in support of the agreement.

The requirement to provide valuable consideration and limitations on restrictions in light of valuable consideration are new requirements under Nevada law. Unfortunately, the Nevada Legislature did not define what constitutes “valuable consideration.”

2. A non-compete cannot prohibit a former employee from providing service to a former customer or client if:

  • The former employee did not solicit the former customer or client;
  • The customer or client voluntarily chooses to leave and seek services from the former employee; and
  • The former employee otherwise is complying with the limitations in the non-compete agreement as to time, geographical area, and scope of activity being restrained, other than any limitation on providing services to a former customer or client who seeks the services of the former employee without any contact instigated by the former employee.

3. When an employee who is subject to a non-compete agreement is terminated due to a “reduction in force, reorganization or similar type of restructuring,” the employer may enforce the agreement only “during the period in which the employer is paying the employee’s salary, benefits or equivalent compensation, including, without limitation, severance pay.”

4. Where a court finds that a non-compete agreement is supported by valuable consideration, but has unreasonable or overbroad restrictions, A.B. 276 supersedes Golden Road and restores the court’s ability to revise the restrictions to the extent necessary to make them enforceable.

Next Steps

The exact parameters of the new requirements described above will need to be determined through future litigation and court decisions, which Jackson Lewis will monitor. Further, while A.B. 276 does not state whether its provisions are applicable retroactively to agreements that already have been executed, all employers should take a close look at their existing non-compete forms or template agreements to ensure the terms comply with this new law.

Please contact your Jackson Lewis attorney to discuss these developments and your specific organizational needs.

©2017 Jackson Lewis P.C. This material is provided for informational purposes only. It is not intended to constitute legal advice nor does it create a client-lawyer relationship between Jackson Lewis and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material. This material may be considered attorney advertising in some jurisdictions. Prior results do not guarantee a similar outcome.

Reproduction of this material in whole or in part is prohibited without the express prior written consent of Jackson Lewis P.C., a law firm that built its reputation on providing workplace law representation to management. Founded in 1958, the firm has grown to more than 900 attorneys in major cities nationwide serving clients across a wide range of practices and industries including government relations, healthcare and sports law. More information about Jackson Lewis can be found at www.jacksonlewis.com.

See AllRelated Articles You May Like

August 2, 2019

New Jersey Court Brings ‘Clarity and Uniformity’ to Analysis of Restrictive Covenants

August 2, 2019

The New Jersey Appellate Division has clarified the analysis required to determine the effect of restrictive covenant agreements (RCAs) and offered guidance to practitioners drafting RCAs under New Jersey law in a decision on six consolidated actions. ADP, LLC v. Kusins, No. A-4664-16T1 (N.J. Super. Ct. App. Div. July 26, 2019).... Read More

May 17, 2019

The EPL Insurance Advisor – May 2019

May 17, 2019

To assist underwriters and claims professionals in assessing emerging employment risks, we are pleased to provide the first issue of our newsletter. The EPL Insurance Advisor highlights topical issues in claims, defenses, and liability risk management developments. 2019 EPLI Trends Report – What Analysts and Underwriters Should... Read More

May 15, 2019

Does Massachusetts Non-Compete Law Restrict Access to Federal Court or Arbitration?

May 15, 2019

The Massachusetts Noncompetition Agreement Act (Non-Compete Act) has yet to be tested, but its venue provision likely will come under special scrutiny. The venue provision governs the geographical location and forum in which a non-compete lawsuit may be maintained. Due to its apparent conflicts with federal law, the venue provision will... Read More