A Nebraska non-compete agreement is a partial restraint of trade that prevents a former employee or business owner from pursuing a particular line of work. Nebraska courts allow non-competes but are primarily concerned with limiting them to the risks of former employees abusing contacts they made under a former employer.

Because Nebraska courts will strike down unreasonable agreements rather than modify them to make them enforceable, careful drafting is crucial.

Are Non-Competes Enforceable in Nebraska?

Yes, non-competes are enforceable if they are

1. Reasonable, in the sense that they are not harmful to the public;
2. Not more extensive than is reasonably necessary to protect the employer’s legitimate interest; and
3. Not unduly harsh or oppressive to the employee.

Aon Consulting, Inc. v. Midlands Fin. Benefits, Inc. (2008)

Sale of Business vs. Employment Contract

In deciding whether to enforce a non-compete contract, courts must first determine if it is found in the sale of a business (sometimes called the “sale of good will”) or an employment contract. Nebraska courts are more willing to uphold non-compete agreements arising from the sale of a business than those contained in an employment contract. (Unlimited Opportunity, Inc. v. Waadah (2015)).

For purposes of enforcing non-competes, franchise agreements are considered sales of a business. (H & R Block Tax Servs., Inc. v. Circle A Enterprises, Inc. (2005)).

Legitimate Business Interest

Employers have legitimate business interests that can support a non-compete agreement in preventing unfair competition by former employees but not in preventing the competition that a business would ordinarily face. Legitimate protectable interests include customer contacts, customer relationships, and trade secrets or confidential business information. (Boisen v. Petersen Flying Serv., Inc. (1986)).

Scope of Restraint

Non-compete agreements beyond the former clients or customers with which the former employee regularly interacted may be overly broad and thus unenforceable. (Mertz v. Pharmacists Mut. Ins. Co. (2001)).

Public Interest

Although there is a public interest in promoting competition and consumer choice, a non-compete agreement that removes one competitor from a line of work for a limited period of time or over a limited geographic area does not necessarily infringe on the public interest. (Presto-X-Co. v. Beller (1997)).

Prohibited Professions

Employment contracts, partnership agreements, and related legal documents that restrain an attorney from representing clients are not enforceable, except for agreements regarding retirement benefits. Limited, reasonable restrictions may also be included in contracts for the sale of a law practice. § 3-505.6(a) Nebraska Supreme Court Rules.

Case settlements that limit an attorney’s ability to practice in the future are also unenforceable. § 3-505.6(b) Nebraska Supreme Court Rules.

Terminating an Employee

It is unclear whether terminating an employee will make a non-compete agreement unenforceable.

Burden of Proof

The party seeking to enforce a non-compete agreement has the burden of proving that the agreement is reasonable and necessary to protect a legitimate business interest. (Sec. Acceptance Corp. v. Brown (1960)).

Continued Employment (consideration)

Continued employment appears to be adequate consideration to enforce a non-compete agreement. (Sec. Acceptance Corp. v. Brown (1960)).

Maximum Term

There is no maximum term in statutes or case law. Nebraska courts evaluate the agreement as a whole and consider time alongside geographic limitation and scope of restraint.

Agreements lasting one year have recently been upheld when they are limited to the employer’s former clients (C & L Indus., Inc. v. Kiviranta (2005)) or a limited geographic area ((H & R Block Tax Servs., Inc. v. Circle A Enterprises, Inc. (2005)) and stuck down when they are not (Unlimited Opportunity, Inc. v. Waadah (2015)).

Blue Penciling

Nebraska courts will not modify an unreasonable non-compete agreement to make it enforceable; the agreement will either be enforced as written or not enforced at all. CAE Vanguard, Inc. v. Newman (1994).