Legislative session brings key changes to Nevada noncompete law

The 2021 Nevada legislative session has already brought changes to state employment law. Among the most noticeable developments is Assembly Bill (AB) 47, which amends the statute governing noncompete agreements. AB 47 brings three key changes to the state’s noncompete law.

Three key changes for a new noncompete tune in Nevada

Change 1: No more noncompetes for most hourly employees. AB 47 now renders unenforceable any noncompetes entered into by employees who are paid solely on an hourly wage basis (exclusive of tips or gratuities). As a further protection for hourly employees, if an employer files suit to enforce (or an employee challenges) such a noncompete, the courts are now required to award reasonable attorneys’ fees and costs if the employee succeeds in defeating the covenant.

On its face, the first change appears to bring sweeping reform affecting all hourly workers. In reality, however, some hourly workers may still be covered by noncompetition agreements. If an employee earns an hourly base wage but also receives commissions, bonuses, or other compensation, AB 47 may not prohibit her from being bound by restrictive covenants.

Ultimately, Nevada’s courts will need to determine in precisely which “hourly-plus” employment arrangements noncompetes can still survive. Since state courts have a history of bringing equitable considerations into the analysis of noncompete enforceability, it’s anticipated the higher the total compensation paid to the employee, the more likely at least some portion of the covenant at issue will be deemed enforceable.