Employee Non-Compete Agreement and Enforceability Memo — Nebraska

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NEBRASKA Employee Non-Compete Agreement and Enforceability Memo

Quick-Reference Summary

Part A — Enforceability Memo

TO: [Hiring Manager / General Counsel]
FROM: [Drafting Attorney]
RE: Enforceability of Proposed Non-Compete — Nebraska Employee
DATE: [__/__/____]

1. The Two Headline Rules

Rule 1 — No Blue-Pencil. Nebraska law is unique among Midwestern states: courts will NOT modify, sever, or reform an overbroad non-compete. H & R Block Tax Services, Inc. v. Circle A Enterprises, Inc., 269 Neb. 411, 693 N.W.2d 548 (2005). If a restriction is unreasonable in any dimension (duration, geography, scope of activity, or customer reach), the entire covenant fails. A severability clause does NOT save an overbroad covenant. Draft conservatively.

Rule 2 — Polly Customer Limitation. A non-compete that restricts the employee from soliciting or working for any customer of the employer (rather than only customers with whom the employee personally worked) is per se overbroad and void. Polly v. Ray D. Hilderman & Co., 225 Neb. 662, 407 N.W.2d 751 (1987); Aon Consulting, Inc. v. Midlands Fin. Benefits, Inc., 275 Neb. 642, 748 N.W.2d 626 (2008). Restrictions must be tied to customers with whom the employee had material contact.

2. Vlasin Three-Part Reasonableness Test

Vlasin v. Len Johnson & Co., 235 Neb. 450, 455 N.W.2d 772 (1990), restates Securities Acceptance Corp. v. Brown, 171 Neb. 406 (1960). A covenant is enforceable only if:

3. Legitimate Business Interests

4. Duration / Geography Guidance

5. Consideration

6. Remedies

Nebraska permits injunctive relief and damages for breach. Liquidated damages clauses are enforceable if reasonable; courts will void as a penalty if disproportionate. Attorneys' fees are recoverable only if contractually provided (no statutory fee-shift).

7. Industry-Specific Considerations

Nebraska does not have industry-specific non-compete bans (no health-care or tech statute, unlike NM/HI/WV). Standard common-law analysis applies across industries, including physicians, nurses, attorneys (subject to Rule 5.6 ethics restrictions), and tech workers.

8. Recent Developments

• FTC Non-Compete Rule (2024): Vacated nationally by Ryan LLC v. FTC, N.D. Tex. (Aug. 20, 2024). Nebraska common law controls.
• No Nebraska Supreme Court non-compete decision has overruled Polly or H & R Block; both remain the leading authorities.

Part B — Non-Compete Agreement

THIS EMPLOYEE NON-COMPETE AGREEMENT (this "Agreement") is entered into as of [__/__/____] (the "Effective Date"),

by and between:

EMPLOYER:
Name: [________________________________]
Address: [________________________________]
City/County, Nebraska [ZIP]: [________________________________]
(the "Company")

and

EMPLOYEE:
Name: [________________________________]
Address: [________________________________]
City/County, Nebraska [ZIP]: [________________________________]
(the "Employee")

RECITALS

WHEREAS, the Company is engaged in the business of [________________________________] in Nebraska and elsewhere (the "Business");

WHEREAS, the Company has invested in confidential information and customer relationships that constitute legitimate protectable interests under Nebraska law (Polly v. Ray D. Hilderman & Co.; Vlasin v. Len Johnson & Co.);

WHEREAS, in consideration for employment (or mid-employment consideration described herein), Employee agrees to the restrictive covenants set forth below, which the Parties have narrowly drafted to comply with Nebraska's strict-construction rule and the Polly customer-contact limitation;

NOW, THEREFORE, the Parties agree:

1. NEBRASKA STRICT-CONSTRUCTION ACKNOWLEDGMENT

The Parties expressly acknowledge that:

(a) Nebraska courts apply strict construction to non-compete covenants and will NOT modify, blue-pencil, sever, or reform an overbroad provision (H & R Block Tax Services v. Circle A Enterprises, 269 Neb. 411 (2005));

(b) A restriction on solicitation or work involving customers with whom Employee did NOT personally have business contact is per se overbroad under Polly and Aon Consulting;

(c) The Parties have drafted this Agreement narrowly to maximize the prospect of enforcement and to limit restrictions to (i) the duration in Section 5, (ii) the customer scope in Section 6 (limited to Polly customers), and (iii) the geographic scope in Section 7 (matching Employee's actual service area).

2. DEFINITIONS

2.1 "Confidential Information" means non-public proprietary or trade-secret information of the Company, including customer lists, pricing, business plans, financial data, methods, processes, and software, consistent with the Nebraska Trade Secrets Act, Neb. Rev. Stat. § 87-501 et seq., and the federal Defend Trade Secrets Act, 18 U.S.C. § 1836.

2.2 "Polly Customer" means any person or entity that was a customer of the Company at any time during the [____]-month period preceding Employee's termination AND with whom Employee personally had material business contact during employment. The term EXCLUDES customers of the Company with whom Employee had no business contact, consistent with Polly v. Ray D. Hilderman & Co., 225 Neb. 662 (1987).

2.3 "Service Area" means the geographic territory in which Employee personally provided services or had material customer contact during the final [____] months of employment, which the Parties identify as: [________________________________] [list specific Nebraska counties or radius].

2.4 "Competing Business" means any person or entity that develops, markets, sells, or provides products or services substantially similar to or competitive with the Business of the Company.

3. CONSIDERATION

☐ At-hire: This Agreement is a condition of, and consideration for, the Company's offer of employment.

☐ Mid-employment: Employee receives the following additional consideration: $[____] [signing bonus / retention bonus / promotion to ________ / equity grant of ____ shares / enhanced severance]. The Parties agree this consideration is material and not nominal.

☐ At separation: Severance of $[____] and benefits described in a separate Separation Agreement constitute consideration.

4. CONFIDENTIAL INFORMATION

Employee shall not, during employment or thereafter, use or disclose Confidential Information except as authorized by the Company or required by law. DTSA notice (18 U.S.C. § 1833(b)): Employee may not be held liable for trade-secret disclosure made in confidence to a government official or attorney solely for reporting/investigating a suspected violation of law, or in a sealed court filing.

5. NON-COMPETE — POLLY-COMPLIANT FORM

During Employee's employment and for a period of [____] months (recommended: 12; maximum: 24) following termination of employment for any reason, Employee shall not, directly or indirectly:

(a) Solicit, divert, or accept business from any Polly Customer for a Competing Business; OR

(b) Provide services to a Competing Business in any role substantially similar to Employee's role with the Company that involves use of the Company's Confidential Information.

This Section is narrowly tailored to:

• Customer scope: limited to Polly Customers (Section 2.2);
• Geographic scope: within the Service Area (Section 2.3);
• Activity scope: limited to roles substantially similar to Employee's role;
• Duration: [____] months from termination.

6. NON-SOLICITATION OF CUSTOMERS

During the Restricted Period, Employee shall not, on behalf of any Competing Business, solicit or accept business from any Polly Customer. The Parties expressly disclaim any restriction on solicitation of customers with whom Employee did not personally do business, consistent with Polly.

7. NON-SOLICITATION OF EMPLOYEES

During the Restricted Period, Employee shall not solicit or induce any employee of the Company with whom Employee worked during the final [____] months of employment to terminate their employment with the Company.

8. RETURN OF COMPANY PROPERTY

Upon termination, Employee shall return all Company property, including documents, devices, keys, access credentials, and Confidential Information in any form.

9. INJUNCTIVE RELIEF

Employee acknowledges that breach of Sections 4–7 may cause irreparable harm. The Company may seek temporary, preliminary, and permanent injunctive relief in addition to actual damages.

10. SEVERABILITY (LIMITED EFFECT IN NEBRASKA)

If any provision is held unenforceable, the remainder shall continue in effect. The Parties acknowledge, however, that under H & R Block Tax Services v. Circle A Enterprises, 269 Neb. 411 (2005), Nebraska courts will not reform or blue-pencil overbroad non-compete provisions, and an unreasonable restriction may render the entire covenant void.

11. CHOICE OF LAW / VENUE

This Agreement is governed by Nebraska law. Exclusive venue shall lie in the District Court of [______] County, Nebraska, or the U.S. District Court for the District of Nebraska.

12. ENTIRE AGREEMENT / COUNTERPARTS

This Agreement is the entire agreement of the Parties on this subject. It may be executed in counterparts and by electronic signature pursuant to the Nebraska Uniform Electronic Transactions Act, Neb. Rev. Stat. § 86-612 et seq.

EXECUTION

Part C — Pre-Signing Checklist

☐ Drafted with full understanding that Nebraska is a STRICT-CONSTRUCTION / NO-BLUE-PENCIL jurisdiction (H & R Block, 269 Neb. 411)

☐ Customer scope LIMITED to Polly Customers (customers with whom Employee personally did business)

☐ No restriction on "all customers" or customers Employee never serviced

☐ Geographic scope matches Employee's actual Service Area (not full Company territory)

☐ Duration is 12 months (or 18–24 months with strong record of access to confidential info)

☐ Activity scope limited to substantially similar roles; not all employment

☐ Legitimate business interest articulated (goodwill, confidential info, or trade secrets — NOT mere suppression of competition)

☐ Consideration documented (at-hire offer, mid-employment bonus/promotion, or severance)

☐ Confidentiality/NDA provision included (separately enforceable under NE Trade Secrets Act)

☐ DTSA whistleblower notice included (18 U.S.C. § 1833(b))

☐ Public interest analysis done — no deprivation of essential community service

☐ Hardship analysis done — Employee retains reasonable means to earn a living

☐ Nebraska choice of law and Nebraska venue

☐ E-signature / counterpart language (NE UETA)

☐ Reviewed by Nebraska-licensed attorney before execution

☐ Removed all <!-- GUIDANCE --> comments before delivery

Sources and References

• Polly v. Ray D. Hilderman & Co., 225 Neb. 662, 407 N.W.2d 751 (1987): https://law.justia.com/cases/nebraska/supreme-court/1987/880-5.html
• Vlasin v. Len Johnson & Co., 235 Neb. 450, 455 N.W.2d 772 (1990)
• Securities Acceptance Corp. v. Brown, 171 Neb. 406, 106 N.W.2d 456 (1960)
• H & R Block Tax Services, Inc. v. Circle A Enterprises, Inc., 269 Neb. 411, 693 N.W.2d 548 (2005): https://caselaw.findlaw.com/court/ne-supreme-court/1309936.html
• Aon Consulting, Inc. v. Midlands Fin. Benefits, Inc., 275 Neb. 642, 748 N.W.2d 626 (2008)
• Professional Business Services Co. v. Rosno, 268 Neb. 99, 680 N.W.2d 176 (2004)
• American Sec. Servs., Inc. v. Vodra, 222 Neb. 480, 385 N.W.2d 73 (1986)
• Nebraska Trade Secrets Act, Neb. Rev. Stat. § 87-501 et seq.
• Defend Trade Secrets Act, 18 U.S.C. § 1836; whistleblower immunity, 18 U.S.C. § 1833(b)
• Ryan LLC v. FTC, No. 3:24-CV-00986-E (N.D. Tex. Aug. 20, 2024) (FTC Non-Compete Rule vacated)
• NSBA, The Nebraska Lawyer — non-compete primer: https://cdn.ymaws.com/www.nebar.com/resource/resmgr/nebraskalawyer_2017plus/2021/novemberdecember/TNL-NovDec21_Mag.pdf