Thomas, Ahnell, Laraway & Smith, LLC
Denver Civil Defense LAWYERS
A non-compete agreement is an agreement between an employer and an employee that the employee will not seek employment with a competing employer or start a competing business after employment ends.
Non-compete agreements are designed to protect employers in the form of commitment from employees and to protect employers’ investment in employees. They should not be used as a means of intimidation to force an employee to stay with a particular employer. A non-compete agreement may also be useful in protecting relationships with suppliers, key customers, other employees, referral sources, pricing strategies, or business plans.
Non-compete agreements can be unpopular in the eyes of the law, as they seem to discourage competition, and many courts will narrowly construe them. Some states, like California, do not recognize non-compete agreements at all. The State of Colorado is particularly harsh on non-compete agreements, though not as harsh as California. As a business, it is important to understand Colorado’s laws regarding non-compete agreements and what makes them enforceable.
If you wish to protect your investment in an employee as well as your relationships with customers, suppliers, and other employees via a non-compete agreement, it is important that you understand how to create an enforceable non-compete agreement. The Denver non-compete agreement lawyers at the Thomas Law Firm can help you draft said agreement. If you already have covenants in place, we can review them on your behalf and ensure that they are legally sound.
What Makes a Denver Non-Compete Agreement Enforceable?
Colorado presents challenges to drafting and enforcing non-compete agreements. The state has placed legal restrictions on what is considered a valid non-compete agreement and whether or not it is enforceable.
The State of Colorado does not generally allow non-compete agreements, unless the agreements meet specific requirements. A non-compete agreement can be enforced if the following apply:
- It is used to protect trade secrets;
- It is used to protect the purchaser in connection with the sale of a business and/or its assets;
- It is used to recover the expense of education or training of an employee of less than two-year duration; and/or
- It is used to restrict executive, management, or professional personnel to those personnel.
Additionally, the restrictions placed on employees or independent contractors in a non-compete agreement must be reasonable, meaning that it does not place unfair or overly-restrictive conditions on the individuals who sign the contract. For a non-compete agreement to be considered reasonable, the court will look at:
- The geographic scope of the restriction;
- The duration of the restriction; and
- Whether the agreement is overly restrictive.
It is important to a business that it has a non-compete agreement that is both valid and reasonable. If a business has a non-compete agreement that is neither of those two things, it may not be enforceable in Colorado. A business may run into trouble should its non-compete agreement not meet the state’s requirements.
A business must also consider other factors, such as independent contractors, what non-competition means in the context of employment, and contractual defenses to non-compete agreements. These are complicated questions for which a business may want to hire legal counsel to assist.
Retain the Help of a Knowledgeable Non-Compete Agreement Attorney
If you own a business and have a vested interest in securing your financial future, you may wish to seek legal counsel from the Thomas Law Firm. You have a right to protect your investments in your employees and your trade secrets. Call our law firm today to get the help you need in drafting an enforceable non-compete agreement in Colorado.