United States: Tectonic Shift Affecting Enforcement Of Noncompetition Agreements Emanates From The 2017 Nevada Legislative Session And Passage Of AB 276

Nevada noncompetition law has historically had few seismic shifts, which changed in 2016 when the Nevada Supreme Court issued its opinion in Golden Road Motor Inn, Inc. v. Islam, 376 P.3d 151 (Nev. 2016).  That case sent shockwaves affecting noncompetition agreements employers already had in place, especially with respect to whether their agreement's restriction had any limits on the scope of work restricted at a competing entity or whether the restriction effectively prohibited an employee from working for a competitor in any capacity – even "as a custodian."

Under Golden Road, when an employee's noncompetition agreement contains no such limits on the work restricted, that agreement, as a matter of law, is more restrictive than necessary to protect the employer's interest.  Golden Road also held that when a noncompetition agreement extends beyond what is necessary to protect the employer's interest, that agreement is "wholly unenforceable" and courts may not modify or "blue pencil" the contract to make it reasonable.  Nevada was an all-or-nothing jurisdiction.

During the 2017 Legislative Session, the Nevada Legislature passed AB 276, which was signed into law and made effective on June 3, 2017.  This new statute represents yet another seismic shift affecting noncompetition agreements, including a shift away from the Nevada Supreme Court's prohibition of "blue penciling."

The new law first codifies that a noncompetition covenant will be void and unenforceable unless the covenant:

  1. Is supported by valuable 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 any undue hardship on the employee; and
  4. Imposes restrictions that are appropriate in relation to the valuable consideration supporting the noncompetition covenant. 

The first three of these requirements were essentially already present to some measure under existing case law.  But the fourth requirement will require some employers to re-evaluate their noncompete agreements once again.  Continued employment has historically been held to be sufficient valuable consideration for an at-will employee's post-hire noncompetition agreement in Nevada.  But under this fourth requirement, more appears to be required now.  Under the new law, a noncompetition covenant requires more than just the support of "valuable consideration." The valuable consideration supporting the noncompetition covenant must also be measured against the noncompetition covenant's restriction for a determination of appropriateness—a balancing of the cost to the employee (the restriction) and the benefit (the consideration, such as a raise).

The takeaway for employers is that the consideration supporting their noncompetition agreements they are using may be insufficient, especially if their agreements contain broad restrictions and the consideration is only the at-will employee's continued employment.  In other words, the broader the geographic area, scope of activity, and duration restrictions in a noncompetition provision – even if necessary to protect the employer – the more valuable the consideration may arguably be required. 

The ground may stop shaking for some employers considering this new law's additional provision impacting "blue penciling," a practice that had been shut down by Golden Road.  This law states that if a noncompetition agreement is challenged and a court finds that it imposes restraints greater than are necessary for the employer's protection and imposes undue hardship on the employee, the court is required to "blue pencil" the agreement and revise the covenant to the extent necessary to make it not more restrictive than is necessary for the employer's protection.  Hence, employers using noncompetition agreements that may have overbroad restrictions, if challenged, can take some solace in the court being required to modify the agreement to its liking and then enforce it as modified. 

The new law provides other notable developments.  While many noncompetition agreements state that the restrictions will be enforced regardless of how the employee ends up leaving the employer (i.e., whether by resignation or termination), under the new law, if an employee subject to such an agreement loses their job through a reduction-in-force, reorganization or restructuring, the covenant will only be enforceable during the period in which the employer is paying the employee's salary, benefits or equivalent compensation, including severance pay.  In other words, if you want to hold an employee you are laying off to his or her noncompetition agreement, it may be a good idea to have him or her sign a severance agreement that continues their pay during the duration of the restriction. 

The new law also impacts noncompetition provisions that have non-solicitation restrictions preventing an employee from providing service to a former customer or client.  Such a restriction now cannot be imposed if: (a) the former employee did not instigate contact with and solicit the former customer or client; (b) the customer or client voluntarily chose to leave and seek services from the former employee; and (c) the former employee is otherwise complying with the noncompetition agreement's restrictions.

Even with the new mandate on "blue penciling," employers should take a hard look at their noncompetition agreements.  Taking care to avoid time, scope of activity, and geographic restrictions that are more restrictive than necessary will help employers avoid having their noncompetition agreements balked at as unenforceable, requiring them to enforce the agreement in court and subject them to the court's blue pencil. 

Employers can also no longer operate under the assumption that continued employment alone will be sufficient consideration for a noncompetition agreement and must now consider whether the employee is getting an appropriate benefit for the bargain, in relation to the level of restriction that is being imposed. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions