Colorado public policy disfavors non-compete agreements but it does not prohibit them. Colorado law and Colorado courts will still allow, for example, enforcement of non-compete agreements in Colorado against highly compensated employees for the purpose of protecting trade secrets. In contrast, California generally prohibits non-compete agreements and refuses to enforce them in most cases.
As of January 1, 2024, California went so far as to expand the states restrictions on non-compete agreements to cover employees seeking work in California even if they are subject to a non-compete agreement signed in another state while working in another state and enforceable under another state’s law, California Business and Professions Code Section 16600.5. In other words, California’s new law is an attempt to protect workers moving to California, and for all practical purposes encourage workers to move to California, by invalidating non-competes from other states.
However, before a worker subject to a non-compete agreement packs their bags for California, they should keep in mind that running to California may not solve their problem. In one of the first tests of the scope of California’s new law, a Massachusetts federal court rejected the argument that California’s law and public policy overrides Massachusetts’s interest in the dispute. Instead, the Court applied Massachusetts law as agreed upon by the parties in the non-compete agreement they signed and issued a temporary restraining order barring the former employee from competing anywhere in the United States for a year.
On September 26, 2024, the First Circuit Court of Appeals upheld the lower court’s ruling and determined that the former employee failed to establish that “California’s public policy eclipses the parties’ clear and unambiguous agreement to apply [Massachusetts]’s law.” In other words, the First Circuit determined that the noncompete agreement was a valid and enforceable agreement even though the former employee moved to California.
The facts of your case are likely to be different and thus might end in a different result. Hansen Law Firm can help you better understand your rights and responsibilities under your non-compete agreement. To schedule a free consultation about Colorado non-compete agreements, call 303 785 7777.