Nevada Private Work Prompt Pay Act – Payments from Owner to Prime (General) Contractor

As construction activity continues to increase in Nevada it is important that contractors and suppliers protect their right to payment for work and/or materials supplied to works of improvement.   There are numerous tools which can be used, one of which is the Nevada Private Work Prompt Pay Act (NRS 624.609 et seq.).  The statutes were enacted to help ensure payment to those supplying labor and material to projects in Nevada.  There are specific requirements regarding the time in which payment must be made.  If a contractor enters into an agreement with the owner of the project, then payment will be due according to the payment terms contained in that contract.  In the event the contract does not contain a schedule of payments, then payment is due within 21 days after the date the prime (general) contractor submits a request for payment.  Timelines are key and careful attention should be made to ensure that all pertinent dates are tracked.

Owners may withhold payment in certain circumstances, however, strict adherence to statutory requirements must be followed.  It is common for owners to withhold a retention amount from each payment which is due the prime contractor.  While in many jurisdictions this amount may vary, Nevada has limited the retention amount to a maximum of 5% of the payment to be made.  Any provision to the contrary is void under Nevada law.

Owners may also withhold payment for any work which has not yet been completed, unless the contract calls for such payment to be made.  Additionally, owners may withhold payment for costs and expenses reasonably necessary to correct or repair any work which is the subject of the request for payment and which is not materially in compliance with the agreement to the extent that such costs and expenses exceed 50 percent of the retention amount withheld.  As seen, tracking the amount retention held is important as Nevada law seeks to avoid any “over withholding”.  Payment may likewise be conditioned upon the receipt of releases issued by downstream subcontractors and/or suppliers.  The releases forms which should be used are set forth in related Nevada statutes and it is recommended that the statutory forms be used.

Additionally protections are also afforded contractors with regard to the type of notice which must be provided prior to payment being withheld.  Prior to withholding payment an owner must provide a written notice of its intent to withhold payment.  The notice must be:  1) written; 2) be provided on or before the date payment is due; 3) give a reasonably detailed explanation of the condition or the reason the owner will withhold payment , including, without limitation, a specific reference to the provision or section of the agreement, and any documents relating thereto, and the applicable building code, law or regulation with which the prime contractor has failed to comply; and, 4) must be signed by an authorized agent.

As noted, the amount of money subject to withholding is limited.  This has been done to avoid the the practice of withholding all money from a contractor when only a portion of the work is in dispute.  While the law concerning payments has been in force for a number of years, oftentimes owners and contractors are not aware of their rights and obligations, therefore it is critical make every effort to be aware of these important provisions.


Are Your Non-Compete Agreements Valid Under the New Law?

In the 2017 Legislative Session the Nevada Legislature passed Assembly Bill (“AB”) 276 which materially alters the manner in which restrictive covenants will be enforced in Nevada in the future.  It is is common in employment agreements, particularly those of key employees, to include a restrictive covenant which prohibits certain competitive actions on behalf of the employee after leaving or being terminated.  Employers often times use these agreements to protect themselves from employees leaving to seek employment with a competitor after they have been trained at considerable cost.  Nevada recognizes the enforceability of such agreements so long as they meet certain, specific requirements.

Under Nevada law, restrictive covenants are enforceable, provided that the terms of the covenant are reasonable.  “Reasonableness” is measured by whether an agreement imposes upon the employee any greater restraint than is reasonably necessary to protect the business and good will of the employer.  See Camco, Inc. v. Baker, 113 Nev. 512, 518, 936 P.2d 829, 833 (1997).  The time duration and geographic scope of the restriction sought to be imposed are two important factors in evaluating the reasonableness of any employment restriction.

Until the passage of AB 276, Nevada courts were not permitted to “blue pencil” employment agreements which were found to be overly restrictive.  “Blue penciling” refers to a practice of enforcing an overly broad employment agreement through the court’s striking the unenforceable clauses and/or modifying the agreement in such a way as to be enforceable.  AB 276 changed this practice and mandates that courts engage in “blue penciling”.

AB 276 specifically states that noncompetition agreements are void and unenforceable unless they are: (a) supported by “valuable consideration”; (b) do not impose greater restraint than is necessary to protect the employer; (c) “do[] not impose any undue hardship on the employee”; and (d) only impose restrictions that are appropriately related to the valuable consideration that supports the agreement.  Additionally, under A.B. 276(2) non-compete provisions cannot prohibit customers from doing business with the employee if: (a) the former employee does not solicit the customer; (b) the customer voluntarily chooses to seek out the former employee; and (c) the former employee is otherwise complying with the limitations in the non-compete agreement.

Given that AB 276 has only recently been enacted there are no cases which interpret its specific provisions, thus employers are advised to proceed with caution and to review their employment agreements carefully to ensure compliance with the new law.