While many entrepreneurs are inspired to launch their businesses with the knowledge they acquired from prior experiences, issues can arise when they breach the noncompete agreement they signed during their tenure at your company. When your former employee’s business directly competes with your company, legal recourse may be available to prevent them from doing so.
Finding legal representation with the skills to navigate the complex, evolving landscape of noncompete agreements in Nevada can prove to be difficult. If your company needs help enforcing a noncompete agreement to prevent your former employee from starting a competing business, you can trust the commercial litigation team at Hone Law to pursue justice and safeguard your rights in the process. To discuss the issue and strategize a resolution, consider connecting with our team at (702) 608-3720 today.
What Is the Purpose of a Noncompete Agreement?
Noncompete agreements have long served as an important tool for companies to protect confidential information and restrict employees from establishing a competing business, typically within a geographic area and period of time after their employment ends.
How Common Are Noncompete Agreements?
According to the Federal Trade Commission, about 1 in 5 workers – or 30 million Americans – are bound by a noncompete agreement. While these agreements have historically been used for highly skilled employees or executives with access to important trade secrets or proprietary information, organizations are increasingly having all workers sign a noncompete agreement.
Given the value of noncompete agreements, Nevada employers are increasingly using these agreements to establish legal protections against employees looking to gain an unfair advantage in the market. The enforceability of noncompete agreements is a critical issue for many employers, however, and navigating the terms of these contracts can pose major issues for your company.
Is My Company’s Noncompete Agreement Enforceable in Nevada?
This invites the question: is my company’s noncompete agreement enforceable in Nevada? If so, can it prevent a former employee from starting a business in direct competition with your company? Generally, Nevada has long acknowledged the legality of noncompete agreements and has favored employers when enforcing these agreements.
Based on NRS 613.195, a noncompete agreement is legally enforceable in Nevada if it meets four key requirements:
- The agreement is supported by a valuable consideration. The term “valuable consideration” has not been defined, but statutory interpretations suggest that it includes an employee’s continued at-will employment.
- It is reasonable in scope and does not establish restraints that are greater than necessary to protect the employer.
- Does not impose unnecessary hardship on the worker.
- Only place restrictions in relation to the valuable consideration.
Essentially, a noncompete agreement must be supported by consideration and its terms must be reasonable. The standard of reasonableness focuses on two factors: time and territory. During what period and within which geographic region will the employee be restricted from competing with their former employer? When it comes to the enforceability of noncompete agreements, Nevada law and judicial precedents offer some important considerations regarding these two standards.
Time Period
Nevada courts seldom look favorably on noncompete agreements that lack a time limitation. A noncompete agreement cannot limit an employee from ever starting a competing business. Rather, it must specify that the limitation is for a reasonable amount of time to avoid unfair solicitation or advantages.
Geographic Scope
Likewise, restrictions in geographic regions must be reasonable. This standard is subject to a great deal of interpretation, as companies that once served a specific region are now able to offer their products on a global level due to the internet. Your noncompete agreement should be specific in geographic scope. For instance, if you run a medical clinic, you may limit former employees from starting their own practice within a five-mile radius of your organization.
What Other Legal Options Does My Company Have If a Former Employee Starts a Competing Business?
If your company does not have an enforceable noncompete agreement, Nevada law has established other legal options to limit former employees from starting a business that competes with your organization. For instance, you may have a claim against your former employee based on:
- Intellectual property infringement. Even if a worker develops intellectual property during their employment at your company, they rarely own that IP. This means that if they use this intellectual property to launch their own business, you may be able to file a claim for IP infringement. At Hone Law, we recognize the unparalleled importance of IP in today’s fast-paced, tech-driven society. Our team of experienced attorneys has extensive experience litigating across diverse venues to safeguard your intellectual property rights.
- Theft of confidential information. If a former employee steals or engages in the misappropriation of your confidential information to develop their own product or service, you may be able to pursue legal recourse. For that reason, it may be possible to secure damages for loss of revenue and obtain a cease and desist to prevent the former employee from using your confidential information for their own business activities.
When faced with a situation where a former employee starts a competing business, your company may be able to bring a legal claim against the person based on how the competition arises. If the individual caused harm to your business, we may hold them accountable in court. Your attorney will ensure that you better understand your legal options and the conditions under which an employee can create a business that competes with your company.
Enforcing a Noncompete Agreement? Nevada Companies Look to Hone Law
Of all the considerations a person must make when starting a business, the legal aspects are perhaps the most essential, especially when there is a noncompete agreement at play. At Hone Law, we combine our experience with an unwavering commitment to our clients’ interests to resolve issues before they escalate into costly trials.
If you believe that your company’s former employee is acting in violation of their noncompete agreement, we will consider all angles of your case to pinpoint your most persuasive strategy. To speak with a seasoned commercial litigation attorney at Hone Law, consider contacting our team at (702) 608-3720 today.