Compete or Don’t Compete? That is the Question.

Compete or Don’t Compete? That is the Question.

Certain employees operating within the state of Nevada are legally bound by an employment contract.  An employment contract is a legal document between an employer and employee that outlines the terms of employment and the employer-employee relationship.  Many terms are discussed and determined when drafting an employment agreement, and some of those terms are critical to both parties.  Such terms could include responsibilities, compensation, benefits, stock options, length of employment, retirement options, nondisclosure agreements,  and termination.  In addition to these terms, and many others that may be negotiated, is an additional term that some may refer to as a “non-compete provision.”  This provision would come into play if and when the relationship turns sour or if one party is looking to terminate, or has terminated, the relationship.    For an employer, it is a form of a security blanket, but for an employee, it could be a career breaker.

 

In the negotiation phase of an employment agreement, the non-compete provision is sometimes the least negotiated term because the agreement is drafted during a time when the employee is being recruited by the employer.  This time period is often referred to by some as the “honeymoon phase.”  During the honeymoon phase, although an employer may require that a non-compete provision be included in the employment contract, the employee may not wish to place himself in a position to negotiate a “break-up” provision if he truly wants to be offered the opportunity of employment.  If he refuses to agree to a non-compete provision or attempts to play hardball during the negotiation phase, will he really be offered the position?

 

The language of a non-compete clause, and its eventual enforcement or non-enforcement, can essentially become a career maker or breaker for the employee because the language determines, among other things,  whether the employee will be able to compete against his employer if the relationship is terminated.  In other words, upon termination of the employer-employee relationship, will the terminated employee be permitted to accept a position of employment from another employer within the same industry in the same geographic location?  If not, it could mean the end of the employee’s career.  However, it makes good sense that an employer would not want a former employee to go to work for a direct competitor.  However, certain limitations need to be reviewed when drafting and attempting to enforce non-compete provisions.  Livelihoods are at issue.  Mouths need to be fed, and bills need to be paid.

 

The Nevada Supreme Court has informed us, among other things,  that a non-compete covenant is too broad and indefinite to be enforceable where it contains no limit on the work restricted and effectively prohibits an employee from working for a competitor in any capacity.  The Nevada Supreme Court has provided further guidance by letting us know that it will not rewrite the non-compete provisions if they are deemed to be unlawful.  So, when considering employment contracts, either as an employer or an employee, consider consulting with O’Reilly Law Group and our experienced attorneys.  The future of your business or your livelihood may depend on it.

2018-06-26T22:44:27+00:00