I receive a lot of questions from employers and employees about the process for enforcing a non-compete agreement in Nevada.
In Nevada, an employer seeking to enforce a non-compete engages counsel and files a lawsuit against the ex-employee alleging the circumstances that constitute a breach of the non-compete agreement. If the employer reasonably believes that the ex-employee is also breaching an agreement prohibiting the ex-employee from misusing the employer’s confidential information or soliciting the employer’s customers or employees, then the employer will add those breaches to the lawsuit. If the employer believes that the ex-employee’s new employer has wrongfully caused the ex-employee to breach the non-competition agreement, a confidentiality agreement, or a non-solicitation agreement, then the former employer may name the new employer as an additional defendant in the lawsuit.
Simultaneously with filing the lawsuit, the employer’s attorney will file a motion for temporary restraining order and for preliminary injunction. The motion should be supported by a sworn statement of a company representative and any other witnesses for the employer who have knowledge of the claimed breaches. The attorney bringing the motion also includes a certificate of the attorney’s efforts to notify the opposing party of the motion. In addition, a proposed order will be prepared and submitted with the motion.
At this point, things get interesting from a procedural prospective. In Nevada, a temporary restraining order may be obtained in an emergency situation with little or no notice to the other side. This is known as an “ex parte” proceeding. The attorney will hand-walk or otherwise deliver the papers to the Judge’s chambers and ask for a meeting with the judge to discuss the application for temporary restraining order. The judge determines whether and when she will meet with the employer’s attorney. Sometimes, the judge considers the proposed temporary restraining order without any input from the ex-employee. Sometimes the ex-employee is able to engage an attorney on short notice to request from the judge an opportunity to be heard. Such a request is usually honored if it is received quickly enough.
If the judge grants the temporary restraining order, then he also schedules a preliminary injunction hearing to occur within 15 days. The temporary restraining order automatically expires in 15 days, but can be extended once by the judge for another 15 days. The judge is supposed to make the employer post a bond or other security before the temporary restraining order goes into effect. Sometime that security turns out to be fairly minimal. If the temporary restraining order is granted, then the employer will post the security and then put the ex-employee and new employer on notice of the order’s requirements. If the judge does not grant the temporary restraining order, she will still schedule the preliminary injunction hearing. Before the date of the preliminary injunction hearing, the ex-employee’s attorney should file a written opposition to the employer’s motion that includes a sworn statement from the ex-employee and any other witnesses on whom the ex-employee is relying.
One of the primary focuses of the preliminary injunction hearing will be for the judge to determine if the non-competition agreement is reasonable in its length, geographic scope, and definition of the prohibited competitive conduct. In contrast to the less-formal application process for a temporary restraining order, a preliminary injunction hearing is an evidentiary proceeding that will take place in the courtroom after notice is given to all parties. Exhibits will be marked and witnesses will testify.
By the time of the preliminary injunction hearing, the former employer and the ex-employee will be receiving feedback as to how the judge sees the case. Each will probably have a good idea of whether the other has the staying power and determination to keep litigating. So this is often a good juncture for settling the dispute. The judge might conduct settlement discussions at some point during the preliminary injunction hearing or at least invite the parties to do so. The employer and ex-employee can also take the initiative to resolve their dispute without waiting for the judge’s invitation. If the parties do not settle and the judge enters a preliminary injunction, the preliminary injunction will stay in place for the duration of the lawsuit. This will give the former employer a strong upper hand. Alternatively, if the judge declines to enter a preliminary injunction, then the former employer will need take a hard look at whether it should continue the lawsuit.