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Mertz v. Pharmacists Mut. Ins. Co. - 261 Neb. 704, 625 N.W.2d 197 (2001)

Rule:

When the issue is whether a covenant not to compete is enforceable, with respect to conflict of laws disputes, the court must determine which state has the most significant relationship to the transaction with respect to the covenant not to compete.

Under Nebraska law, in order to determine whether a covenant not to compete is valid, the reviewing court considers whether the restriction is (1) reasonable in the sense that it is not injurious to the public, (2) not greater than is reasonably necessary to protect the employer in some legitimate interest, and (3) not unduly harsh and oppressive on the employee.

Facts:

The district court ruled that the covenant not to compete clause in the employment agreement between the plaintiff employee and the defendant was unenforceable. Defendant employer argued that the district court erred in finding that Nebraska's substantive law controlled the issue of whether the covenant not to compete clause was enforceable.

Issue:

Does the enforceability of the covenant not to compete clause in plaintiff’s employment contract fall under the Nebraska law?

Answer:

Yes.

Conclusion:

The Supreme Court of Nebraska held that the district court correctly determined that the covenant not to compete clause was unenforceable as a matter of law because: (1) the uncontroverted evidence showed that the employee was hired to work in Nebraska and that all of his services were performed in Nebraska, so Nebraska law applied; and (2) the restriction was greater than reasonably necessary to protect the employer's legitimate interest.

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