Thursday, November 10, 2011
Many businesses have an interest in protecting themselves from competition engendered by a former employee or executive who might have specialized knowledge of the business or business components that puts him or her in a more advantageous competitive position than outside competitors. To address this situation, businesses often utilize non-compete agreements to contractually prevent company personnel from competing with the business or capitalizing on established relationships by soliciting existing clients or customers. Most often, non-compete agreements are designed to restrict the former employee after leaving the business on the theory that once the business invests time and capital into training the employee and entrusting him or her with sensitive business information, the business should be protected from the employee's use of that information to the business' disadvantage.
Non-compete agreements are enforceable in Nevada. However, in reviewing them, the Nevada courts have determined to strike a balance between the protection of the former employer and the ability of the former employee to make a living. Generally speaking, if overbroad, non-compete agreements in Nevada, if litigated, will be modified by the Court to the shortest duration of time (generally a year) and the smallest geographic area (city, county or state) that will achieve that balance. These considerations may weigh in favor of a broader non-compete agreement, however, if the knowledge or skills of the former employee, directly attributable to his former employment, are highly specialized, rare, or confidential.
As with any business agreement, business owners are encouraged to seek the counsel of a Nevada business lawyer to assist in producing a non-compete agreement that is narrowly tailored to the business and the unique competition issues it may face from former employees, rather than relying on an "off-the-shelf" non-compete agreement that is sure to be reformed by the court if litigated.
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