## Facts

- Philip A. Burkhardt worked in the Las Vegas trench shoring equipment market and accepted employment with NES Trench Shoring in September 2000.
- As a condition of employment, and in exchange for $10,000, Burkhardt signed (1) a noncompetition covenant and (2) a nondisclosure covenant.
- The noncompetition covenant barred Burkhardt for one year after employment ended from selling, leasing, marketing, distributing, or dealing in trench shoring equipment within a 60-mile radius of his work location.
- The nondisclosure covenant barred him indefinitely from disclosing information such as customer lists, employee lists, price lists, pricing strategies, and training and sales materials.
- NES later sold its business assets to United Rentals Northwest, including customer lists and other business information; United asserted it acquired NES’s rights under Burkhardt’s covenants through the asset purchase.
- Burkhardt refused to sign a new noncompetition agreement with United and took employment with Traffic Control Services, a competitor.
- United sued and obtained a preliminary injunction enforcing the noncompetition and confidentiality restrictions against Burkhardt; Burkhardt and Traffic Control appealed.

## Issues

1. Whether an employee’s covenant not to compete may be assigned to an asset purchaser without the employee’s consent.
2. Whether, absent an express assignment provision and independent consideration, a purchaser may enforce the employee’s restrictive covenants through an asset sale.

## Decision

- The Nevada Supreme Court reversed the preliminary injunction to the extent it enforced the noncompetition covenant in favor of United.
- The court held the purported assignment of the employee noncompetition covenant to the asset purchaser was invalid without the employee’s consent supported by independent consideration.
- The court indicated that protections aimed at preventing misuse of confidential business information may remain available to an asset purchaser, even though the noncompetition restriction was not enforceable by assignment on these facts.

## Legal Principles

- Employee noncompetition covenants are not freely assignable in a corporate asset sale.
- Absent an arm’s-length agreement that explicitly permits assignment and is supported by separate consideration, a noncompetition covenant may be assigned only with the employee’s consent supported by independent consideration.
- The personal nature of the employment relationship—including the employee’s reliance on the identity and characteristics of the employer—makes noncompetition obligations especially unsuitable for transfer to a different employer without the employee’s separately compensated assent.
- An asset purchaser’s acquisition of business information supports the purchaser’s ability to seek protection against misuse of confidential information, distinct from enforcing a restraint on competition.

## Conclusion

The court held that an asset purchaser could not enforce an employee’s noncompetition covenant merely because the purchaser bought the employer’s assets; assignment requires the employee’s separately compensated consent (or an explicit, bargained-for assignment right supported by separate consideration), though confidentiality protections may still be pursued to safeguard acquired business information.


Traffic Control Servs., Inc. v. United Rentals Nw., Inc., 87 P.3d 1054 (Nev. 2004)