Employment laws vary drastically from state to state. While California does not enforce any kind of non-compete agreement or restrictive covenant, Nevada does allow restrictive covenants as part of employment contracts.
However, non-compete agreements are subject to limitations set by state law and were amended as recently as a few years ago. If an agreement doesn’t hold up under the law, the courts can throw it out, removing any restrictions that would prevent a former worker from competing with your company.
If you intend to have your workers sign a non-compete agreement while operating a business in Nevada, you must make sure that you comply with state requirements or risk having the courts throw out the agreement when a worker challenges it.
What are the requirements for an enforceable non-compete agreement?
State law has changed in recent years, creating additional restrictions on non-compete agreements whilst simultaneously giving the courts more authority to navigate disputes related to such agreements. In order for your non-compete to hold up if challenged in the Nevada courts, you must:
- Offer your employee some kind of valuable consideration for signing
- Ensure that the restrictions reflect the consideration the worker receives
- Not create an undue hardship for the worker
- Only restrict economic behavior to the extent necessary to protect your business
Valuable consideration could mean an offer of employment or a promotion, as well as a raise or a one-time bonus. The greater the economic impact of the agreement, the more valuable the compensation to the employee should be.
The new law also theoretically allows a former employee of a business to do work with their clients, customers or competitors if the worker hasn’t actively solicited that company. In theory, the courts can choose either to throw out non-compliant non-compete agreements or to make changes to specific terms that violate state laws.
Does your non-compete agreements adequately protect the business?
If you have been using boilerplate documents for years or haven’t updated them since the law changed, it may be time to review both your non-compete agreement and your more comprehensive employment contract.
Adjusting and tweaking the contents of your employment contracts can help your company stay compliant with state law and give you more protection if a former employee tries to do something unethical.