Updated March 01, 2024
A Nebraska non-compete agreement allows a person to be restricted from working in the same business industry for a specific time period and geographical area. There are no State statutes governing non-competes, although, past court decisions have sided with employers’ agreements that do not overreach beyond what is reasonably necessary to protect a legitimate interest.
Laws
Legally Enforceable?
Yes, a non-compete is enforceable in Nebraska if it follows 3 requirements:[1]
First, is the restriction reasonable in the sense that it is not injurious to the public;
Second, is the restriction reasonable in the sense that it is no greater than is reasonably necessary to protect the employer in some legitimate interest; and
Third, is the restriction reasonable in the sense that it is not unduly harsh and oppressive on the employee.
Ordinary Competition vs Unfair Competition
In Nebraska, an employer cannot choose to have an employee sign a non-compete to prohibit ordinary competition from entering the market. Rather, it must show evidence that the employee would be in unfair competition in the event of termination.
An example of unfair competition found by the court has been to “appropriate the employer’s goodwill by initiating personal contacts with the employers’ customers.”[2]
Sale of a Business
It is legal for a seller of a business to enter into a non-compete to protect a buyer’s interests. A non-compete with a seller generally has a better chance to be enforceable versus an employment-related agreement if challenged in a Nebraska court.[3]
Continued Employment
The continued employment of an employee is deemed sufficient consideration to validate a non-compete. In addition, any severance payments made to a terminated employee may also count as adequate consideration.[1][4]
Attorneys (prohibited)
It is unlawful to restrict an attorney’s right to practice law within the State. Furthermore, a law firm cannot inflict liquidated damages against an attorney upon the termination of employment.[5][6]
Maximum Term
3 years is deemed a reasonable term by the Supreme Court of Nebraska.[7]
Blue Penciling Not Allowed
A Nebraska court will not modify or amend an overbroad or unreasonable non-compete.[8][9]
Sources
- Securities Acceptance Corp. v. Brown (1960)
- Mertz v. Pharmacists Mut. Ins. Co. (2001)
- Chambers-Dobson, Inc. v. Squier (1991)
- Aon Consulting, Inc. v. Midlands Financial Benefits, Inc. (2008)
- § 3-505.6
- Nebraska Ethics Advisory Opinion for Lawyers No. 06-09
- American SEC. Services, Inc. v. Vodra (1986)
- Unlimited Opportunity, Inc. v. Waadah (2015)
- Terry D. Whitten v. Malcolm (1995)