An agreement not to solicit clients or customers is one type of non-compete agreement in Colorado. Although the details of each agreement will vary, an agreement not to solicit clients generally prohibits one party to the agreement from directly or indirectly soliciting the business of the other party’s clients. A non-solicitation agreement can be between an employer and an employee, or between two businesses.
Non-solicitation agreements can have a detrimental effect on the restricted party’s ability to operate a business or earn a living. This occurs particularly when the non-restricted party does business with a large percentage of the available clients in an area.
Enforceability of Non-Solicitation Agreements
Non-Solicitation of Clients vs. Non-Solicitation of Employees
It is important to note that Colorado law draws a distinction between agreements not to solicit clients and agreements not to solicit employees. In Phoenix Capital, Inc. v. Dowell,176 P.3d 835 (Colo. Ct. App. 2007), the Colorado Court of Appeals noted: “An agreement not to solicit customers is a form of an agreement not to compete.”
Like other covenants not to compete, courts look unfavorably upon agreements not to solicit clients. However, fewer restrictions are placed on agreements not to solicit employees.
Colorado’s Non-Compete Statute
Colorado has a non-compete statute(Co. Rev. Stat. Sec. 8-2-113), which prohibits non-compete agreements, including non-solicitation of clients, except in certain circumstances.
Agreements not to compete are allowed only in the following circumstances:
- Contracts for the purchase and sale of a business or assets of a business;
- Contracts for the protection of trade secrets;
- Contractual provisions 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.
Additional Requirements for the Enforceability of Non-Solicitation Agreements
Even if an agreement not to solicit clients falls within one of the exceptions above, it must still satisfy several other requirements which ensure that the restriction is reasonable.
An agreement not to solicit clients must be for:
- A reasonable period of time;
- A reasonable geographic scope; and
- A reasonable scope of business activities.
What is reasonable may vary from one situation to another, depending on the nature of the business. For example, an agreement not to solicit clients may be reasonable only within a 10- or 20-mile radius if the business is a retail store. However, an agreement not to solicit clients may be reasonable within a 100 or 200 mile radius for a more specialized business.
Colorado Non-Solicitation Attorneys
At HKM Employment Attorneys LLP, we represent both employees and employers in disputes involving non-solicitation agreements. These disputes often involve disagreements over whether a restriction is reasonable. An attorney with a detailed knowledge of Colorado case law will be able to present the strongest possible argument for your side.
If you have questions about a non-solicitation agreement or are involved in a dispute over a non-solicitation agreement, it is important to contact an experienced Colorado non-solicitation attorney. Call HKM Employment Attorneys LLP at 303-991-3075 or contact us online for a private consultation.