Colorado non-compete agreements are used to attempt to restrict a company’s employees, independent contractors, customers and vendors from engaging in competitive activities with that company. Many people wonder “Are non compete agreements enforceable?” For example, an employee with in-depth knowledge of a particular business or industry may be restricted from sharing their knowledge with competitors. Let’s examine at Colorado non-compete law to discern some answers.
Colorado Non-Compete Law
In the State of Colorado, non-compete agreements generally are not allowed, unless they fall under one of the following four exceptions:
- They are used to protect trade secrets
- They are used to protect the purchaser in connection with the sale of a business and/or its assets
- They are used to recover the expense of education or training an employee of less than two-year duration
- They are used to restrict executive and management personnel or professional staff to those personnel
Non-compete agreements that do not fall under one of these exceptions generally cannot be enforced in Colorado.
Unfortunately, the statutes and case law governing non-compete agreements in Colorado are vague at best. C.R.S. Section 8-2-113, boldly states that it is unlawful to use threats, force or any other means of intimidation to prevent a person from engaging in any lawful occupation. It also states that “any covenant not to compete which restricts the right of any personal to receive compensation for performance of skilled or unskilled labor for any employer shall be void.”
However, Colorado’s bold pronouncement within C.R.S. Section 8-2-113 against the enforce-ability of non-compete contract is misleading. The pronouncement is of absolutely no effect if it can be successfully argued that the non-compete agreement in question falls into one or more of the four exceptions noted above.
Simply put, while C.R.S. Section 8-2-113 touches on the issue of non-compete agreements and their legality in Colorado, it does not, unfortunately, provide sufficient detail and explanation to guide those who may be subject to such agreements. For example, the law leaves it up to the courts to determine who qualifies as “executive and management personnel” and what restrictions, if any, are necessary to protect any purported trade secrets.
Reasonable Non Compete Agreements
Even if a business is able to establish that its Colorado non-compete contract is allowed under the law, the business must still prove that the restrictions imposed by the agreement are reasonable. Among other things, to determine whether the restrictions are reasonable, the court will examine the:
- Geographic scope of the restriction
- Duration of the restriction
- Whether the agreement is overly restrictive
Negotiating Non Competes in Colorado
The best way to restrict the enforce-ability of a non-competition agreement is to seek qualified legal counsel like Hansen Law Firm in helping to narrow the scope of the agreement before it is signed. Unfortunately, many employees and independent contractors simply sign such agreements without thinking about how damaging such non-compete agreements can be on their long term career goals. Spending money hiring legal counsel to assist in the negotiation of a non-compete agreement is money well spent if one considers the long term impact that a broad non-compete contract can have on your career, including your ability to switch employers, start your own business and be paid what you are worth. If you’ve already asked the question “Are Non Compete Agreements Enforceable” and you’ve decided that yours isn’t, we can help. Or if you still don’t know the answer, we can help decide that too. As a trusted Denver employment lawyer, you will be in good hands to get the contract you deserve.
Are Non-Solicitation Agreements Enforceable in Colorado?
Non-solicitation agreements are a form of non-compete agreement which are specifically tailored to attempting to restrict a former employee or independent contractor of the company from soliciting and/or otherwise engaging in business with a company’s current or prospective customers.
In Colorado, non-compete and non-solicitation agreements entered into after August 9, 2022 are more difficult to enforce than those entered into before that date. For non-compete agreements entered into after August 9, 2022, unless the non-compete agreement concerns the sale of a business, a physician, or the recoupment of expenses incurred in educating and/or training a worker: (a) only highly compensated persons making (as of 2022, at least $101,250 a year and as of 2023, at least $112,500 a year) can be asked to sign a non-compete agreement; and (b) only persons compensated (in 2022, at least $60,750 a year and in 2023, at least $67,500 a year) can be asked to sign a non-solicitation agreement. If a person earns less than the above limits, and the non-compete and/or non-solicitation agreement in question does not concern the sale of a business, a physician or the recoupment of expenses incurred in educating and/or training a worker, it is illegal for an employer to require a worker who primarily works or resides in Colorado to sign such an agreement. Note that the above dollar limits are subject to change each year depending on the Colorado Department of Labor’s calculation as to what constitutes a highly compensated worker. Further note that equity or in-kind benefits cannot be used to satisfy the above compensation threshold requirements.
Even if a person earns more than the above limits, new changes to Colorado law only allow non-compete and non-solicitation agreements to protect trade secrets, and to be no broader than is reasonably necessary to protect the employer’s legitimate interests in protecting their trade secrets. In this regard, restrictions are expected to continue to be applied by Colorado Courts requiring that such non-compete and non-solicitation agreements be reasonable in geographic reach, duration, and scope. For agreements entered into after August 9, 2022, companies will no longer be allowed to justify the enforcement of a non-compete or non-solicitation agreement based solely on the fact that an employee may be an executive or in management or professional staff thereto.
If retained by you, Hansen Law Firm can help you to understand how Colorado courts are likely to determine whether you have had access to trade secrets and whether the Colorado non-compete and/or non-solicitation agreement in question is likely to be considered broader than reasonably necessary to protect the employer’s legitimate interests in protecting their trade secrets.
Do You Need A Contract Attorney in Colorado?
If you have already signed a Colorado non-compete agreement, it makes sense to seek qualified legal counsel like Hansen Law Firm to assist you in understanding your rights and responsibilities under the agreement. It would be tragic to simply assume that you are subject to the restrictions of a non-compete agreement when a skilled legal professional could review your agreement and tell you otherwise.
At Hansen Law Firm, we can help you navigate the vagueness and complexity of the law regarding non-compete and non solicitation agreements in Colorado. If you still have more questions about your specific agreement and questions like “are Colorado non-compete agreements enforceable”, call us. Our Denver contract lawyers are experts on all things related to non-compete agreements and their legality and enforceability within the State of Colorado. To schedule a free consultation, please call 303-785-7777.