Non-competes—restrictive covenants in which one party agrees to refrain from competing with another—have long been enforceable in Nevada, even in the healthcare field, so long as they are reasonably necessary to protect the legitimate business interests of the beneficiary of the non-compete and do not contravene the public interest. See Ellis v. McDaniel, 95 Nev. 455, 459, 596 P.2d 222, 225 (1979); see generally NRS 613.195. Consequently, non-competes are a relatively common tool used by Nevada businesses seeking to protect their business interests against competition from former employees.
In recent years, efforts have been made, in Nevada and elsewhere, to limit non-competes. For instance, NRS 613.195 has been amended to impose limitations on non-competes, including the prohibition of non-competes for workers paid an hourly wage. See generally NRS 613.195. In 2023, the Nevada Legislature passed AB 11, a bill that would have prohibited non-competes between hospitals and medical providers, but it was vetoed by Governor Lombardo.
In April 2024, the Federal Trade Commission (“FTC”) issued a final rule that prohibits—nationwide—most non-competes for employees (the “Rule”). See 16 CFR § 910 (2024). The Rule is scheduled to become effective on September 4, 2024 (the “Effective Date”). Once effective, employers must provide notice to their employees that their non-competes, except those that fall within the Rule’s exceptions, are no longer enforceable. Id. § 910.2(b).
The Rule includes only entities and activities that are subject to the FTC’s enforcement jurisdiction. For instance, banks and non-profits may not be subject to the Rule. See generally Non-Compete Clause Rule, 89 Fed. Reg. 38342, 50-54 (May 7, 2024). Moreover, the Rule includes some limited exceptions. It does not apply to:
Beyond its limited exceptions, FTC guidance indicates that the Rule does not inhibit the enforcement of intellectual property rights, including trade secret laws. The Rule also does not prohibit reasonable non-disclosure/confidentiality agreements, non-solicitation agreements, invention assignment agreements, or “garden leaves” that do not act as de facto non-competes. (A “garden leave” is an arrangement in which the worker technically remains an employee for a period of time, does not work during this period, but continues to be compensated).
The Rule will effect a significant change to the employment law landscape if it goes into effect. At the time of this writing, the Rule is subject to numerous legal challenges. At least one court has issued a preliminary injunction enjoining its enforcement against the plaintiff in that action while another court has denied a similar request for preliminary injunction. Compare Ryan LLC v. FTC, 2004 WL 3297524 (N.D. Tex. July 3, 2024) with ATS Tree Services, LLC v. FTC, 2024 WL 3511630 (E.D. Pa. July 23, 2024). Expect more to come on the legal front.
Given the Rule, employers should immediately evaluate existing non-competes. And, whether the Rule survives legal challenge, recent legislative and regulatory hostility towards non-competes should serve as a cue to employers to implement or shore-up other avenues to protect their legitimate business interests.
Employers should implement or reassess policies, procedures, and agreements concerning the protection of confidential and proprietary information. Without non-competes as an option for employers to protect their business interests against competition from former workers, trade secret law may become of heightened importance; an essential element of a claim for misappropriation of trade secrets is that the employer undertook efforts reasonable to maintain the secrecy of the information. See NRS 600A.030(5).
In addition, employers should consider, where appropriate, implementing or reassessing existing non-solicitation agreements and invention assignment agreements. Moreover, employers should consider whether garden leaves make business sense in appropriate circumstances.
Given recent legislative and regulatory scrutiny of non-competes, failure by businesses to explore other means of protecting their interests could lead to competitive disadvantages.
This article was originally published in the September 2024 edition of the COMMUNIQUÉ, the official publication of the Clark County Bar Association.
Remember “flat fees,” “fixed fees,” “non-refundable fees,” and “earned-on-receipt fees”? That is about all they are now—(probably fond) memories. Nowadays, “a fee paid to a lawyer in advance for services to be rendered in the future must be placed in the client trust account and may be withdrawn only as earned by the performance of the contemplated services.” This is the current state of the law as summarized in American Bar Association Formal Opinion No. 505 (5/3/23).
It does not matter what a lawyer calls it; with quite rare exceptions, a fee paid for work to be performed in the future must be placed in the trust account and disbursed to the lawyer only when the work is performed. This may require the lawyer to divide the full scope of the work into segments or stages, or for single function engagements, to collect the fee upon completion of the work.
Opinion 505 contains several instructive hypotheticals. Here they are:
Another thing that is fading fast is the high-priced termination fee contained in many retainer agreements—primarily for personal injury cases—that disincentivizes clients from terminating their lawyers. These provisions commonly provide that if the client terminates the law firm before the case is over, the firm is entitled to a quantum meruit fee calculated at $1,000 per hour for all work done on the matter by lawyers and non-lawyer personnel alike.
These types of provisions are unenforceable, and their attempted enforcement may violate the Nevada Rules of Professional Conduct. See Steve Dimopoulos, LLC v. Harris Law Firm, LLP, Case No. A-21-28630-C, Eighth Jud. Dist. Ct., Clark County, Nevada. These provisions are punitive because they: (i) interfere with the client’s absolute right to discharge the lawyer at any time with or without cause, see In re Kaufman, 93 Nev. 452, 567 P.2d 957 (1977); and (ii) seek to collect a fee from the client without regard for the Brunzell factors, see Logan v. Abe, 131 Nev. 260, 350 P.3d 1139 (2015). As such, they should be removed from your retainer agreements.
This article was originally published in the May 2024 edition of the COMMUNIQUÉ, the official publication of the Clark County Bar Association.
☐ In the District Court, file the Notice of Entry for order or judgment to be appealed from
If appealing from a non-final order or judgment, file in the District Court the Notice of Entry of the order granting Nevada Rule of Civil Procedure (“NRCP”) 54(b) certification
☐ File a Notice of Appeal in the District Court within 30 days of service of the Notice of Entry of the order or judgment to be appealed (unless another deadline is provided by statute) [Nevada Rule of Appellate Procedure (“NRAP”) 3, 4]
☐ File a Case Appeal Statement in the District Court within 30 days of service of the Notice of Entry of the order or judgment to be appealed (unless another deadline is provided by statute) [NRAP 3]
☐ Pay the Supreme Court filing fee ($250) and any District Court filing fees to the District Court Clerk upon the filing of the Notice of Appeal and Case Appeal Statement [NRAP 3]
☐ If no supersedeas bond is filed which includes security for costs on appeal, pay a bond for costs on appeal ($500) to the District Court Clerk upon the filing of the Notice of Appeal and Case Appeal Statement [NRAP 7]
☐ Unless the case is assigned to the settlement program, meet and confer with opposing counsel regarding transcripts necessary for the appeal [NRAP 9]
☐ Unless the case is assigned to the settlement program, within 14 days of the docketing of the appeal, file a Transcript Request Form in the District Court and the Supreme Court, serve it on the appropriate court reporter, and pay deposit for transcripts [NRAP 9]
☐ Within 21 days of the docketing of the appeal, file a Docketing Statement in Supreme Court [NRAP 14]
☐ Unless the case is assigned to the settlement program, while drafting Opening Brief, meet and confer with opposing counsel regarding a Joint Appendix of exhibits
☐ Unless the case is assigned to the settlement program, within 120 days of the docketing of the appeal, file Opening Brief and Joint Appendix (or Appellant’s Appendix) [NRAP 28, 30, 31].
☐ Within 30 days of the filing of the Answering Brief, file Reply Brief and a Reply Appendix, if necessary [NRAP 28, 30, 31].
☐ If the case is set for oral argument, at least 7 days before oral argument, file a Notice of Appearance of Counsel with the Supreme Court [NRAP 46]
☐ If necessary, within 18 days of the filing of the decision on appeal, file a Petition for Rehearing [NRAP 40]
☐ If necessary, within 14 days of written entry of denial of rehearing, file a Petition for En Banc Reconsideration [NRAP 40A]
☐ If necessary, within 18 days of the filing of the decision on appeal by the Court of Appeals or the Court of Appeal’s decision on rehearing, file a Petition for Review by the Supreme Court [NRAP 40B]
Stay tuned for a Checklist for Respondents for Civil Appeals in Nevada, which will be posted here next week.
Disclaimer:
The information provided in this article does not, and is not intended to, constitute legal advice. All information, content, and materials available in this article are for general informational purposes only. The information in this article may not constitute the most up-to-date legal information. Any links to third-party websites included in this article are only made for the convenience of the reader, and the author of this article does not recommend or endorse the contents of the third-party sites.
Readers of this article should contact their attorney to obtain advice with respect to any particular legal matter. No reader of this article should act or refrain from acting on the basis of information in this article without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney can provide assurances that the information contained herein — and your interpretation of it — is applicable or appropriate to your particular situation. Use of, and access to, this article, or any of the links or resources contained herein do not create an attorney-client relationship between the reader and author.
All liability with respect to actions taken or not taken based on the contents of this article are hereby expressly disclaimed. The content of this article is provided “as is;” no representations are made that the content is error-free.
☐ Within 14 days of service of the Notice of Appeal, file Notice of Appearance of Counsel with the Supreme Court [Nevada Rule of Appellate Procedure (“NRAP”) 46]
☐ If necessary, within 14 days of filing of the Appellant’s Transcript Request Form, send written notification to Appellant’s counsel regarding additional portions of transcripts which are required and were not requested [NRAP 9]
☐ If necessary, within 14 days of service of Appellant’s Transcript Request Form, file a Transcript Request Form for any additional transcripts deemed necessary, serve the form upon the reporter, and pay the necessary deposit for the transcripts [NRAP 9]
☐ If necessary, within 7 days of service of the Appellant’s Docketing Statement, file a 1-page Response to the Appellant’s Statement of the Case or Issues on Appeal [NRAP 14]
☐ Within 30 days of the filing of the Appellant’s Opening Brief, file Answering Brief and a Respondent’s Appendix, if necessary [NRAP 28, 30, 31].
☐ If the case is set for oral argument, at least 7 days before oral argument, file a Notice of Appearance of Counsel with the Supreme Court [NRAP 46]
☐ If necessary, within 18 days of the filing of the decision on appeal, file a Petition for Rehearing [NRAP 40]
☐ If necessary, within 14 days of written entry of denial of rehearing, file a Petition for En Banc Reconsideration [NRAP 40A]
☐ If necessary, within 18 days of the filing of the decision on appeal by the Court of Appeals or the Court of Appeal’s decision on rehearing, file a Petition for Review by the Supreme Court [NRAP 40B]
Click here for an Appellants’ Checklist for Civil Appeals in Nevada.
Disclaimer:
The information provided in this article does not, and is not intended to, constitute legal advice. All information, content, and materials available in this article are for general informational purposes only. The information in this article may not constitute the most up-to-date legal information. Any links to third-party websites included in this article are only made for the convenience of the reader, and the author of this article does not recommend or endorse the contents of the third-party sites.
Readers of this article should contact their attorney to obtain advice with respect to any particular legal matter. No reader of this article should act or refrain from acting on the basis of information in this article without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney can provide assurances that the information contained herein — and your interpretation of it — is applicable or appropriate to your particular situation. Use of, and access to, this article, or any of the links or resources contained herein do not create an attorney-client relationship between the reader and author.
All liability with respect to actions taken or not taken based on the contents of this article are hereby expressly disclaimed. The content of this article is provided “as is;” no representations are made that the content is error-free.