As changes in restrictive covenants laws sweep the nation, Nevada is one of the latest jurisdictions to update its non-compete statute. Last month, the state legislature amended the Nevada Unfair Trade Practices Act to add new requirements for enforceability of non-competes.
The amendment makes the following changes in Nevada law:
- Following what appears to be a growing trend, the amendment prohibits non-competes for low-wage employees; under Nevada's version, such agreements are unenforceable against individuals who are paid solely on an hourly basis, exclusive of tips or gratuities.
- The new statute also requires that when a court revises an overly broad covenant, it must consider any undue hardship that the covenant will cause the restricted party.
- In just a slight change, the amendment goes a bit further than the pre-existing prohibition on covenants that restrict an individual's right to do business with customers that they did not solicit: the amendment now clarifies that employers may not bring an action to enforce such an unenforceable provision (which would seem obvious, but the legislature apparently saw fit to make that crystal clear).
- Most notably for employers, the amendment now provides that a court shall award attorneys' fees and costs to an employee if the employer imposed a non-compete on a low-wage worker as defined above, or violated the preceding prohibition on restricting the individual from accepting work from customers that they did not affirmatively solicit. Of particular note is that this fee-shifting applies even if it is the employee who brings a suit challenging a non-compete, rather than the employer attempting to enforce the same. In other words, employers must carefully draft their agreements to ensure that their restrictive covenants do not violate the statute, as an employee can bring a declaratory judgment action seeking to invalidate an overbroad covenant and be awarded fees, even if the employer ultimately wouldn't have litigated the issue.
The amendment goes into effect on October 1, 2021, so employers should engage counsel before that date to ensure that their agreements are compliant with the new requirements.
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