Nevada Supreme Court Enforces Geographical Limit Requirement

When non-compete agreements first started to be used, they needed to establish a geographic perimeter in order to be enforceable. Non-compete agreements were intended to prevent workers from going to work for the competitor across the street and taking clients, vendors, and/or proprietary secrets with them. In order to stay fair to workers while still protecting the employer, most non-compete agreements were restricted to a certain geographical range – for example, the employee could not go to work for a competitor less than 20 miles away from the employer.

Over the past few years, employers have started expanding the geographical limits in their non-compete agreements until they didn’t bother putting them in at all – in a few cases, they actually specified that the non-compete agreement was effective worldwide.

With the dawn of the Digital Age, businesses started expanding their reach across the globe, making it increasingly difficult to specify a geographical area in which they conduct business. For this reason, some U.S. courts have ruled that it’s OK for companies to leave out the geographical restrictions on a non-compete agreement, but the Nevada Supreme Court recently stated otherwise.

In a recent lawsuit filed in Nevada state court, an employee was working for Landon Shore, a photography company in Nevada where he had signed an employment agreement containing a non-compete agreement that prevented him from working for a competitor in a similar position anywhere in the United States for the first year after the termination of his employment from Landon Shore. But a few months after his employment was terminated, the employee went to work for a competitor, Global Experience Specialists, Inc., which is based in California.

Landon Shore sued, seeking a preliminary injunction against their former worker’s employment with their California-based competitor. The trial court granted the injunction, but the decision was appealed to the Nevada Supreme Court, which overruled the lower court’s decision.

Under Nevada state law, non-compete agreements must be restricted to areas where the company has established relationships with their customers. Because the company had operations in 33 states, plus the District of Columbia and Puerto Rico, the trial court ruled that the non-compete agreement should be enforced when the former employee went to work for a competing company in a state where they do not conduct business.

But the Nevada Supreme Court disagreed. Instead, the appellate court pointed out that Landon Shore did not maintain customer relations in the geographical area where the former employee had gone to work for Global Experience Specialists, Inc. Just because Landon Shore could be considered a “national” company, did not mean that the reach of its non-compete agreements could reasonably extend beyond the area where they conducted business under Nevada employment law.

While it always takes a while for the law to catch up with technology (especially as technology continues to advance at an ever-faster rate) it’s worth noting that the interpretation of the law can always be updated to modern circumstances – and sometimes the old interpretation works just fine.

Our Chicago non-compete agreement lawyers with offices near Oak Brook, Wilmette and Elmhurst have substantial experience in restrictive covenant and breach of contract cases, and we are proud of our record of strong results. Our Chicago restrictive covenant agreement lawyers near Naperville have litigated many non-compete cases in DuPage, Kane and Cook Counties. We represent 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. With offices near Naperville and St. Charles and in downtown Chicago, our Chicago restrictive covenant lawyers take cases from Glenview and Downers Grove 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 us online or call toll-free at (833) 306-4933 or locally at (630) 333-0333 today.