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What To Know About Assembly Bill 47 and Non-Compete Agreements in Nevada

by | Aug 25, 2021 | Business Law, Contract Law

The Nevada Governor recently signed Assembly Bill 47, which amends Nevada’s statute governing noncompetition agreements (NRS 613.195).  Employers should be aware of the changes to the law, especially those with noncompete agreements, which will go into effect on October 1, 2021.

The bill restricts the application of noncompete agreements involving hourly workers. It states that noncompetition covenants cannot be applied to an “employee who is paid solely on an hourly wage basis, exclusive of any tips or gratuities.” While this language exempts hourly employees who receive tips or gratuities from noncompete agreements, it is unknown whether a business could still subject an hourly employee who receives other types of payment (such as bonuses or commissions) to a noncompete agreement.

The bill will also prohibit employers from restricting a former employee from providing service to a former customer or client for the following reasons.

  • The former employee did not solicit the former customer or client.
  • The customer or client voluntarily chose to leave and seek services from the former employee.
  • The former employee is otherwise complying with the confines of the covenant as to time, geographical area, and scope of activity to be restricted.

Lastly, courts must now blue pencil a covenant that “contains limitations as to time, geographical area or scope of activity to be restrained that are not reasonable, imposes a greater restraint than is necessary for the protection of the employer…, or imposes undue hardship on the employee.”  Prior to this amendment, courts would just declare a covenant unlawful. Now, courts must blue pencil and enforce the covenant, even if the former employee has brought the court action to challenge the non-compete.

We recommend getting your non-compete agreements reviewed by experienced legal counsel in Nevada to determine whether your contract complies with this amended law.

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