Nevada Supreme Court Defines Blue Penciling Obligation Of Courts
Thursday, November 9, 2023

In 2016, I wrote about the Nevada Supreme Court's refusal to "blue pencil" non-compete agreements so as to make theme enforceable.  Golden Road Motor Inn, Inc. v. Islam, 132 Nev. 476, 488, 376 P.3d 151, 159 (2016).  The Nevada legislature was not in accord and the following year enacted NRS 613.195(5)*, which requires district courts to blue-pencil unreasonable noncompetition agreements and enforce the revised agreement.  That statute was one of the issues that the Supreme Court addressed in a case that I discussed earlier this week.  Tough Turtle Turf, LLC v. Scott, 139 Nev. Adv. Op. 47 (Nov. 2, 2023).  

NRS 613.195(6) provides that a district court" shall revise . . . to the extent necessary" a noncompete that unreasonably limits the time, geographical area, or scope of activity; a greater restraint than is necessary to protect the employer; or imposes undue hardship on the employee.  This mandate is at apparent odds with NRS 613.195(1) which declares a noncompete "void and unenforceable" if it imposes a restraint greater than necessary to protect the employer; any undue hardship on the employee; or restrictions that are not appropriate in relation to the valuable consideration supporting the agreement.  In Tough Turtle, the Nevada Supreme Court read these seemingly contradictory provisions together to hold that while a district court is not always required to modify an overbroad noncompete agreement, it must do so "when possible".  

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*2017 Nev. Stat., ch. 324, § 1, at 1861, renumbered in 2021 as NRS 613.195(6).  2021 Nev. Stat., ch. 77, § 22.5, at 315.

 

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