Aldrich Law Firm, Ltd.
Aldrich Law Firm, Ltd.

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The general requirements of a binding noncompete agreement

Nevada entrepreneurs often include noncompete agreements in their hiring processes as a way of preventing former employees from divulging confidential company information. On occasion, these contracts become the basis of contract disputes between employers and employees. At the Aldrich Law Firm, we understand that business owners want to resolve such issues as quickly as possible. One of the best ways of doing this is by ensuring that the initial agreement is legally sound and enforceable.

The American Bar Association explains that noncompete agreements must be recognized by the state in order to be enforceable. In addition, employers must have provided consideration (that is, something of value) to employees in exchange for the promise not to compete. The contract must also be based on a legitimate business interest, must not be overbroad and must not unduly burden employees.

The first two requirements are generally not problematic; noncompete agreements are recognized in Nevada, and employment is often considered sufficient consideration. The last three, however, may involve a more in-depth review of the parties’ circumstances and the relevant laws.

Courts are likely to determine that companies seeking to protect confidential business information, trade secrets or client lists have legitimate business interests that warrant noncompete agreements. On the other hand, if a company attempts to enforce a noncompete contract which involves a low-level worker or a business area that has been abandoned, courts may be inclined to rule against the employer.

Noncompete contracts that are not specific enough in their terms may be voided. Agreements that have indefinite end dates, for example, may produce this result. Likewise, a contract that has a burdensome length, such as 10 years, may also be voided due to the hardship it would place on the employee.

For additional information on the legal issues involved in drafting, negotiating or enforcing a noncompete agreement, please visit our page on contract litigation.

John P. Aldrich
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