Non-compete agreements, also called covenants not to compete, exist to help protect one or both parties to a contract from being forced to compete with the other. These agreements often arise in the employment context. The most common scenario is when an employer asks an employee to sign a non-compete agreement that would prevent the employee for competing with the employer during or after the period of employment.
As with any legal contract, it is important to be careful when signing a non-compete agreement. These agreements can be detrimental to the livelihood of the employee who is prohibited from competing. Likewise, these agreements are often extremely important to the employer who benefits from the lack of competition. Relying on the enforceability of a non-compete agreement, an employer may pay employees a higher salary, disclose confidential information, or invest in expensive training.
If you are considering signing a non-compete agreement, it is important to be aware of the effect of the agreement under Colorado law. An experienced employment lawyer can help you by:
- Reviewing the language of the agreement;
- Listening to the specific details of your situation;
- Explaining the legal effect of the language in the non-compete agreement; and
- Advising you on the best course of action.
Colorado’s Non-Compete Statute
In Colorado, there is a strong legal presumption that a non-compete agreement is unenforceable. However, if certain conditions are satisfied, the presumption can be overcome and a non-compete agreement can be enforceable.
Colorado has a non-compete statute that details when an agreement is enforceable(Co. Rev. Stat. Sec. 8-2-113). Under the statute, agreements are enforceable when they are:
- Contracts for the purchase and sale of a business or assets of a business;
- Contracts for the protection of trade secrets;
- Contracts providing for the recovery of expense of training or educating an employee who has been with an employer for less than two years; and
- Contracts with executive and management personnel and their professional staff.
One common legal issue is whether an employee fits within this “executive and management personnel” exception.
In addition to satisfying the requirements of the non-compete statute, a covenant not to compete must also be reasonable in order to be enforceable. This means that the non-compete agreement must be:
- For a reasonable period of time;
- For a reasonable in geographic scope; and
- For only a reasonable range of business activities
Although these requirements leave plenty of room for argument as to what is reasonable and what is not, an experienced attorney can review your non-compete agreement and offer guidance as to whether it is reasonable under Colorado law.
Have Your Non-Compete Agreement Reviewed by an Attorney
If you are thinking about signing a non-compete agreement, it is important to first take it to an attorney who can help advise you about the legal consequences of the agreement. Likewise, if you are an employer who relies on non-compete agreements in your business, you may want to have an attorney review the language to see if your agreement is in line with Colorado law. At HKM Employment Attorneys LLP, we have extensive experience reviewing non-compete agreements and offering legal advice regarding these agreements.
If you have questions about a non-compete agreement, get in touch HKM Employment Attorneys LLP today. Contact us online or call us at 303-991-3075 for a private consultation.