Senate Bill No. 511–Committee on Commerce and Labor

 

March 26, 2001

____________

 

Referred to Committee on Commerce and Labor

 

SUMMARY—Limits enforceability of certain contracts in restraint of trade. (BDR 53‑189)

 

FISCAL NOTE:            Effect on Local Government: No.

                                    Effect on the State: No.

 

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EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted.

 

AN ACT relating to employment practices; limiting the enforceability of certain contracts and agreements that restrain persons from engaging in a lawful profession, trade or business; and providing other matters properly relating thereto.

 

THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN

SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:

 

1-1    Section 1. Chapter 613 of NRS is hereby amended by adding thereto a

1-2  new section to read as follows:

1-3    1.  Except as otherwise provided in subsection 2, a provision of a

1-4  contract or agreement that restrains a person from engaging in a lawful

1-5  profession, trade or business is void.

1-6    2.  The provisions of subsection 1 do not prohibit:

1-7    (a) A shareholder of a corporation who sells or otherwise disposes of:

1-8       (1) All of his shares in the corporation;

1-9       (2) All or substantially all of the operating assets of the corporation

1-10  and the goodwill of the corporation;

1-11      (3) All or substantially all of the operating assets of a division or a

1-12  subsidiary of the corporation and the goodwill of the division or

1-13  subsidiary; or

1-14      (4) All of the shares of any subsidiary of the
corporation,

1-15  may agree with the buyer to refrain from carrying on a similar business

1-16  within a specified county or counties, city or cities, or any part thereof, in

1-17  which the business of the corporation, division or subsidiary has been

1-18  transacted, so long as the buyer or any other person deriving title to the

1-19  shares or goodwill from the buyer, carries on a similar business in that

1-20  area.

1-21    (b) A partner may, upon or in anticipation of the dissolution of the

1-22  partnership, the dissociation of the partner from the partnership, or the

2-1  assignment or other conveyance of the partner’s interest in the

2-2  partnership, agree that he will not carry on a similar business within a

2-3  specified county or counties, city or cities, or any part thereof, in which

2-4  the business of the partnership has been transacted, so long as any other

2-5  partner, or any person who obtains an interest in the partnership from

2-6  any other partner, carries on a similar business in that area.

2-7    (c) A member of a limited-liability company may, upon or in

2-8  anticipation of the dissolution of the limited-liability company or the

2-9  transfer or assignment of his interest in the limited-liability company,

2-10  agree that he will not carry on a similar business within a specified

2-11  county or counties, city or cities, or any part thereof, in which the

2-12  business of the limited-liability company has been transacted, so long as

2-13  any other member of the company, or any person who obtains an interest

2-14  in the limited-liability company from another member of the company,

2-15  carries on a similar business in that area.

2-16    (d) A person who sells the goodwill of a business may agree with the

2-17  buyer to refrain from carrying on a similar business within a specified

2-18  county or counties, city or cities, or any part thereof, in which the

2-19  business has been transacted, so long as the buyer or any other person

2-20  deriving title to the goodwill from the buyer carries on a similar business

2-21  in that area.

2-22    (e) A person from negotiating, executing and enforcing an agreement

2-23  with an employee of the person that, upon termination of the

2-24  employment, prohibits the employee from disclosing any trade secrets,

2-25  business methods, lists of customers, secret formulas or confidential

2-26  information learned or obtained during the course of his employment

2-27  with the person, if the agreement is supported by valuable consideration

2-28  and is otherwise reasonable in its scope and duration.

2-29    (f) The displacement or limitation of competition otherwise authorized

2-30  by a specific statute.

2-31    (g) A person who holds a license issued pursuant to chapter 463 or

2-32  464 of NRS or who is required to register with the Nevada gaming

2-33  commission pursuant to chapter 463 of NRS from negotiating, executing

2-34  and enforcing an agreement with an employee of the person that, upon

2-35  termination of the employment, prohibits the employee from pursuing a

2-36  similar vocation in competition with or becoming employed by a

2-37  competitor of the person, if the agreement is supported by valuable

2-38  consideration and is otherwise reasonable in its scope and duration.

2-39    3.  As used in this section, “subsidiary” means a corporation a

2-40  majority of whose voting shares are owned by another corporation.

2-41    Sec. 2.  NRS 613.200 is hereby amended to read as follows:

2-42    613.200  1.  Except as otherwise provided in subsection 2[,] and

2-43  section 1 of this act, any person, [association, company or corporation]

2-44  within this state, or any agent or officer on behalf of the person,

2-45  [association, company or corporation,] who willfully does anything

2-46  intended to prevent any person who for any cause left or was discharged

2-47  from his or its employ from obtaining employment elsewhere in this state

2-48  shall be punished by a fine of not more than $5,000. If a fine is imposed

3-1  pursuant to this section, the costs of the proceeding, including investigative

3-2  costs and attorney’s fees, may be recovered by the labor commissioner.

3-3    2.  The provisions of subsection 1 do not prohibit a person,

3-4  [association, company, corporation,] agent or officer from negotiating,

3-5  executing and enforcing an agreement with an employee of the person[,

3-6  association, company or corporation] which, upon termination of the

3-7  employment, prohibits the employee from:

3-8    (a) Pursuing a similar vocation in competition with or becoming

3-9  employed by a competitor of the person[, association, company or

3-10  corporation;] or ;

3-11    (b) Disclosing any trade secrets, business methods, lists of customers,

3-12  secret formulas or processes or confidential information learned or

3-13  obtained during the course of his employment with the person,

3-14  [association, company or corporation,]

3-15  if the agreement is supported by valuable consideration , [and] is otherwise

3-16  reasonable in its scope and duration[.] , and is not otherwise void

3-17  pursuant to section 1 of this act.

3-18    Sec. 3.  The provisions of section 1 of this act apply to contracts and

3-19  agreements entered into on or after October 1, 2001.

 

3-20  H