In May 2021, the State of Nevada enacted several amendments to its existing non-compete legislation under NRS 613.195. According to Nevada law, a non-compete is enforceable so long as it (1) is supported by consideration; (2) does not impose any restraint that is greater than is required for the protection of the employer for whose benefit the restraint is imposed; (3) does not impose an undue hardship on the employee; and (4) imposes restrictions that are appropriate in relation to the valuable consideration supporting the non-compete covenant. These requirements still stand but are now subject to new restrictions.
The changes went into effect on October 1, 2021, and while the amendments do not state whether its provisions will apply retroactively, it is pivotal for Nevada employers to be aware of the key aspects that the amendments include.
Ban for Hourly Employees
A key change to Nevada law includes a restriction for hourly wage employees. Under the new law, a non-compete provision may not apply to an employee who is paid solely on an hourly basis, excluding any tips or gratuities.
Customer Servicing
The original law prohibited non-compete provisions which restricted a former employee from providing services to a former client or customer if certain requirements were met, such as: (a) the former employee did not solicit the former client or customer; (b) the client or customer voluntarily chose to leave and seek services from the former employee; and (c) the former employee otherwise complied with the limitations set out in the non-compete covenant. Now, the new law prohibits an employer from bringing any action to enforce a non-compete against an employee that falls within this category.
Blue-Pencil
Before the amendments, the non-compete law required judges to revise, or “blue pencil,” non-compete agreements that were supported by valuable consideration, but contained unreasonable limitations as to time, geographical area, or scope of activity and thus in turn imposed a greater restraint than necessary or an undue hardship on the employee. This judicial revision was required only in cases where an employer brought an action to enforce a non-compete. Now, the amendments include blue penciling in actions brought by the employer, and in actions brought by the employee to challenge a non-compete provision.
Lastly, if an action is brought by an employer to enforce a non-compete, or an action is brought by an employee to challenge a non-compete, and the court concludes the non-compete applies to either an hourly wage employee or an employee under the customer servicing provisions, the court must award the employee reasonable attorney’s fees and costs.
The moral of the story is this: be aware of the new Nevada non-compete laws and how they may affect you and your employment agreements.
At ByrdAdatto we are working hard to ensure our clients are well equipped and ready for operating their business. If you have questions regarding this alert, email us at info@byrdadatto.com or call 214.291.3200.
