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When is a non-compete agreement enforceable in Colorado?

Many states, including Colorado, view non-competition agreements to be restrictions on trade that are against public policy. In some cases, however, these agreements are enforceable in Colorado.
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    January 18, 2014 /24-7PressRelease/ -- When is a non-compete agreement enforceable in Colorado?

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Non-compete agreements, also called covenants not to compete, can generate a lot of controversy. Business owners have an interest in protecting their trade secrets and business information from employees who may go to work for other employers. Employees, on the other hand, need the freedom to find new employment in the event of a job loss or if their current positions are not a good fit. Many states, including Colorado, view non-competition agreements to be restrictions on trade that are against public policy. In some cases, however, these agreements are enforceable in Colorado.

Colorado non-compete statute

In general, Colorado law prohibits covenants not to compete, except in some very specific circumstances, including agreements pertaining to:
-The protection of trade secrets
-The sale or purchase of a business or business assets
-Recovery of the expense of training or educating an employee who worked for an employer for fewer than two years
-"Executive and management personnel and officers" as well as those who are staff to executive and management personnel

Many business disputes regarding non-compete agreements center around which employees qualify as "executive and management personnel."

Is the agreement reasonable?

Non-competition agreements are often the causes of business litigation. When a non-competition agreement is before the court, the court will determine whether to enforce the agreement based upon whether the agreement is reasonable. Some of the factors that the court weighs when assessing the reasonableness of an agreement include whether the restriction on employment is limited to:
-A reasonable amount of time
-A reasonable geographical location
-A reasonable scope of business activities

Additionally, if the agreement imposes an undue hardship on the employee or seller of a business, the court is less likely to enforce the agreement.

Signing the agreement

Prior to 2011, Colorado courts would enforce non-compete agreements signed at the time of hiring, but held that an employer needed to offer an existing employee additional consideration in exchange for signing the agreement in order for it to be valid. In 2011, the Colorado Supreme Court held that an employer need not offer additional consideration to an existing employee for a non-compete agreement to be valid because employers have the right to terminate employees at-will. Continued employment constituted the forbearance of a legal right and counted as consideration. As such, it does not matter at what point an employee signs a non-compete agreement.

Speak with an attorney

Given the number of legal issues that can arise with non-compete agreements, it is important for those with questions about Colorado covenants not to compete to seek the assistance of a skilled business law attorney with a solid foundation of knowledge about non-compete agreements. A business litigation lawyer can counsel people how best to proceed given their specific circumstances.

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