South-Western Legal Studies in Business

Employee's Noncompetition Agreement May Not Be Assigned without Consent
Description Nevada high court held that a noncompetition covenant in an employment contract could not be assigned to another company without permission of the employee.
Topic Contracts
Key Words Assignment; Noncompetition Agreement; Employment
C A S E   S U M M A R Y
Facts Burkhardt works for Traffic Control Services, a company that sells and rents trenching equipment to contractors in the Las Vegas area. Previously, Burkhardt worked for NES. As a condition of employment with NES, he was paid $10,000 to sign a noncompetition covenant. They provided that if he left NES he would not work for a competitor firm in the area for one year and that he would protect confidential company information. Later, NES was sold to United Rentals. Burkhardt refused to sign a new noncompetition covenant with United and left to work for Traffic. United sued Burkhardt and Traffic for violating the noncompetition covenant. The district court agreed and ordered the agreement to be enforced for one year. Burkhardt and Traffic appealed.
Decision

Reversed. An employee's covenant not to compete is personal in nature and is unassignable absent the employee's express consent or an express clause permitting assignment that has been negotiated at arm's length with the employee and supported by additional and separate consideration. Post-employment covenants are reviewed with greater care than are similar covenants incident to the sale of a business because the loss of a person's livelihood is a very serious matter.

Citation Traffic Control Services v. United Rentals Northwest, 87 P.3d 1054 (Sup. Ct., Nev., 2004)

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