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Nevada Supreme Court Finds Noncompete Agreement Overly Broad

When someone makes a promise, many people will ask them to “put it in writing” as a way to make sure they follow through. These written documents then form contracts that can be upheld in court if necessary, but the courts don’t always agree to uphold a contract. Just because it was signed and agreed upon by both parties at one point in time does not necessarily make a contract legally binding.

One promise that employers are having an increasingly difficult time enforcing is the noncompete agreement. It’s an agreement included in an employment contract in which both the employer and the worker agree that the employee will not work for a competitor. Noncompete agreements were originally designed to protect the vested interest employers have in their high-level executives – the ones who are most likely to have access to sensitive information, trade secrets, and important relationships with clients. For these kinds of employees to leave with all that business and work for a competitor across the street could be disastrous for a company.

But in their efforts to make iron-clad noncompete agreements, employers sometimes overstretch and include requirements that make it unreasonably difficult for the employee to find any work at all after their employment ends.

As courts continue to see an increase in employers trying to enforce noncompete agreements that have been breached by former employees, each state has come up with its own methods of differentiating the kinds of noncompete agreements that should be enforced from those that are too stringent to expect employees to adhere to.

California made it simple by refusing to recognize any noncompete agreements. Nevada has not gone that far, and although Nevada courts have not yet come up with one heuristic they can all follow when ruling in cases of alleged breaches of noncompete agreements, they do have a test to determine whether a noncompete agreement is sufficiently reasonable to be enforced.

Most noncompete agreements include a time limit, as well as a geographical limit and these are the two factors most courts tend to focus on when deciding whether to enforce an employment contract. Six months to a year is generally considered a reasonable time limit, while the geographic limit depends on largely on the individual situation in which the court is currently ruling.

Golden Road Motor Inn, a casino and resort in Reno, Nevada, recently sued one of its former casino hosts for breach of contract after they took a job as a casino host at another casino.

The problem, according to the Nevada Supreme Court, was that Golden Road’s noncompete agreement was too restrictive to be enforceable. The contract forbade the employee from any employment, affiliation, or service with any gaming establishment within a 150-mile radius for twelve months after termination of employment.

Although casino hosts are valuable employees who are responsible for building and maintaining positive relationships with gamblers, the Nevada Supreme Court pointed out that Golden Road’s noncompete agreement, as it was written, banned the employee from working as a custodian in another casino. Since it is unlikely for a custodian to play a role in customer acquisition and maintenance, the Nevada Supreme Court found the noncompete agreement failed the reasonableness test and refused to enforce it.

Our Chicago non-compete agreement, employment law and business dispute attorneys have defended high level executives in covenant not to compete and trade secret lawsuits. A case in which our firm defended a former Motorola executive was covered in Crain’s Chicago business. You can view that article by clicking here.

DiTommaso Lubin Austermuehle a firm of Chicago business dispute lawyers handles litigation over non-compete clauses for individuals and businesses of all sizes, including small or closely held businesses for whom competition from an ex-employee can be a serious threat. Our Chicago business lawyers with offices near Tinley Park, Downers Grove, Oak Brook and Chicago have substantial experience in restrictive covenant and breach of contract cases, and we are proud of our record of strong results.

DiTommaso Lubin Austermuehle a Chicago business litigation law firm represents both plaintiffs and defendants in such cases, and can also help stop litigation before it starts by reviewing contracts to look for covenants and clauses that could create problems later. Our firm has also handled many shareholder and LLC disputes between owners of closely held corporations, and LLCs.

Based in Oakbrook Terrace and downtown Chicago, our Orland Park and Schaumburg non-compete clause and business dispute lawyers take cases from Naperville and Joliet and many other cities throughout Illinois, as well as in Indiana, Wisconsin and the entire United States. To learn more or set up a free consultation, please contact one of our Chicago business dispute lawyers through the Internet or call toll-free at 1-877-990-4990 today.