Colorado Noncompete Agreement: What's Included and Enforceability
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Is a Non-Compete Agreement Enforceable in Colorado?
In Colorado, non-compete agreements are generally unenforceable unless they meet one of the few limited exceptions laid out in the new non-compete legislation that went into effect on August 10, 2022.
Although this law provides exceptions to the ban on non-compete agreements, the exceptions are very limited and Colorado laws are very worker friendly.
The new regulations include the following provisions:
- All non-compete agreements are void unless they are entered into with a “highly compensated” worker. The 2022 wage threshold for “highly compensated” is $101,250 annually.
- The employee must be employed for at least two years to enforce a non-compete.
- All non-compete agreements not designed to protect trade secrets are void.
- Non-compete agreements that are more broad than necessary to protect an employer’s interests are void.
- Prospective workers must be provided with the non-compete agreement before they accept the job.
- Current employees must be notified at least 14 days before signing the agreement and provided with a summary of the restrictive terms.
- All non-compete disputes are required to be adjudicated in Colorado courts under Colorado laws.
- Non-compete agreements are prohibited for lawyers and physicians.
Like many other states, Colorado requires non-compete agreements to be reasonable in duration and geographic scope. Courts will review the individual facts of each agreement to determine reasonableness.
Is the New Colorado Non-Compete Law Retroactive?
The new Colorado non-compete laws are not retroactive. This legislation was passed on August 10, 2022, and only applies to non-compete agreements entered into after this date. Any non-compete agreements that were executed before August 10, 2022, are still subject to the previous Colorado laws that governed non-compete agreements.
How Long Does a Colorado Non-Compete Agreement Last?
Colorado laws do not include a limit on the duration of non-compete agreements. Instead, we look at how courts have ruled on non-compete disputes to determine what is generally considered reasonable.
Based on past cases, a duration of one year for a non-compete agreement is usually considered reasonable. It should be noted that contracts with durations of up to five years have also been upheld because the reasonableness of duration will depend on the specific facts surrounding the case.
How Do You Get Around a Non-Compete Agreement in Colorado?
The laws governing non-compete agreements in Colorado favor the worker, not the employer, so there are several ways to get around or beat a non-compete agreement. If an employee can prove that the contract does not fit into one of the narrowly tailored exceptions, then the contract will be enforceable.
One exception requires that non-compete agreements must be designed specifically to protect a trade secret. Colorado statutes consider the following business information as “trade secrets”:
- Scientific or technical information
- Designs, processes, procedures, or formulas
- Confidential business or financial information
- Lists of names and personal information
Furthermore, to be considered a trade secret, the employer must have taken measures to prevent the information from becoming available to other people.
If a non-compete agreement doe does not protect a trade secret, it cannot be enforced.
What Voids a Colorado Non-Compete Agreement?
Any contract that is overly broad or unreasonable will be deemed void in Colorado. Unlike other states which allows courts to modify agreements to make them enforceable (a practice called blue penciling), Colorado does not permit this practice. If any term is unenforceable, the entire contract is determined to be unenforceable.
Additional reasons that a Colorado non-compete may be voided include:
- The employee was not given notice about the contract.
- The contract was not signed by the employee.
- The employee makes less than the wage threshold that allows non-compete agreements.
Frequently Asked Questions
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Mark D.
Partnering with business clients to keep their greatest asset - their employees - from becoming their biggest liability. Mark accomplishes this by working with in-house counsel and human resource professionals of several Fortune 50 companies, as well as many smaller public and privately held profit and not for profit organizations, to provide advice and counsel on the day to day employment and workforce practice issues encountered by those organizations. For over fifteen years Mark has been Board Certified in Labor and Employment Law by the Texas Board of Legal Specialization. He is licensed and practices in both Texas and Colorado and has focused his practice for the last 20 plus years on defending companies in employment and labor related matters. During this time Mark has had extensive experience in handling and responding to a wide range of local, state and federal employment issues that impact the management and operations of businesses in a wide range of industries. Mark's experience includes appearances before state and federal agencies and regulatory boards, litigation in both state and federal courts, defense of class actions and appearances before courts of appeal. While Mark regularly handles matters in litigation, he has a high regard for handling every issue with the best interest of the client’s business. Mark is a published author and regular speaks on labor, employment and workplace practice topics. Whether it be an investigation by the Occupational Safety and Health Administration (OSHA), the Wage & Hour division of the U.S. Department of Labor, or other state agency; an Equal Employment Opportunity Commission (EEOC) or state agency charge claiming a violation of local, state or federal employment or labor laws; or the need for direction on a hiring, termination or business operational issue involving employees, Mark has extensive experience in handling these and many other employment and labor issues.
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Ferraro Law Firm was founded by Dean C. Ferraro. Dean earned his Bachelor's Degree from California State Polytechnic University, Pomona ("Cal Poly Pomona") in 1992 and his J.D. Degree from the University of Mississippi School of Law ("Ole Miss") in 1996. He is licensed to practice law in the State Courts of Colorado, Tennessee, and California. Dean is also admitted to practice before the United States District Courts of Colorado (District of Colorado), California (Central District), and Tennessee (Eastern District). Shortly after earning his law license and working for a private law firm, Dean joined the District Attorney's office, where he worked for five successful years as one of the leading prosecuting attorneys in the State of Tennessee. After seven years of practicing law in Tennessee, Dean moved back to his birth state and practiced law in California from 2003-2015. In 2015, Dean moved with his family to Colorado, practicing law in beautiful Castle Rock, where he is recognized as a highly-effective attorney, well-versed in many areas of law. Dean's career has entailed practicing multiple areas of law, including civil litigation with a large law firm, prosecuting criminal cases as an Assistant District Attorney, In-House Counsel for Safeco Insurance, and as the founding member of an online law group that helped thousands of people get affordable legal services. Pursuing his passion for helping others, Dean now utilizes his legal and entrepreneurial experience to help his clients in their personal and business lives. Dean is also a bestselling author of two legal thrillers, Murder in Santa Barbara and Murder in Vail. He currently is working on his next legal thriller, The Grove Conspiracy, set to be published in 2023.
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Employment
Noncompete Agreement
New Jersey
Can I work for a competitor with my current noncompete?
I have ended my non competent consulting agreement with my current employee and I have an offer to work as an employer “not as consultant” with a competitor company to my privious employees so can I work as an employee without any problem? The consultant agreement says the following: Under any circumstances the consultant shall not engage directly or indirectly either as a principal agent , consultant,stock holder , partner or in any other capacity whatsoever have any other relationship with any business which compete with the company in USA.
Jane C.
I suggest that you have an attorney review the entire agreement. It is hard to comment reading a paragraph taken out of context. From the limited facts you present, it seems that you cannot accept this job offer without violating the terms of the non-compete. Disclaimer - This information is provided for general informational purposes only. No information contained in this post should be construed as legal advice and does not establish an attorney-client relationship.
Employee Rights
Noncompete Agreement
New York
Can my employer enforce a non-compete agreement I signed even though I was not provided any additional compensation or benefits in return?
I recently started a new job and was asked to sign a non-compete agreement as a condition of employment. However, I just found out from a colleague that my employer has been enforcing the non-compete agreement against former employees and preventing them from working in similar roles at competing companies. I am concerned because I was not given any additional compensation or benefits in exchange for signing the agreement, and I believe it may be unfair and potentially unenforceable. Can my employer legally enforce the non-compete agreement even though I did not receive any additional compensation or benefits in return?
Damien B.
Hello! Generally, New York courts require that a non-compete agreement be supported by adequate consideration. If the agreement is signed at the beginning of employment, the job itself may serve as adequate consideration. However, if the non-compete is signed after employment begins, the employer may need to offer additional benefits, such as a raise or promotion, for the agreement to be enforceable. There are other defenses against enforcement. For a non-compete agreement to be enforceable, it must be reasonable in terms of duration, geographic scope, and the scope of activities it restricts. A court will evaluate whether the agreement is necessary to protect the employer’s legitimate business interests, such as confidential information or customer relationships. If not, a court could rule the noncompete is not enforceable.
Employee Rights
Noncompete Agreement
Washington
Can my employer enforce a non-compete agreement if I was laid off due to COVID-19?
Can my former employer legally enforce the non-compete agreement I signed when I was hired, considering I was recently laid off due to the economic impact of COVID-19 and the agreement seems to restrict my ability to find new employment in my field? I have been actively seeking new job opportunities in the same industry, but potential employers are hesitant to hire me due to the non-compete agreement, which restricts me from working for competitors or starting my own business in the same field for a certain period of time. I want to understand if the non-compete agreement is still valid and enforceable given the circumstances of my layoff and the current job market conditions.
Merry K.
I'm sorry, but your question is impossible to answer without reviewing your contract and knowing more about your type of job and compensation. Be aware that terms in such agreements are often found to be non-enforceable. You can start by reviewing the Washington State law on point: https://app.leg.wa.gov/rcw/default.aspx?cite=49.62&full=true
Employment
Noncompete Agreement
New York
Noncompete agreement breach consequences?
I recently left my job as an employee at a company that I had worked for for over a year. I was asked to sign a noncompete agreement when I began the job, which I did. I have since started a new job in the same industry as my former employer, which is in violation of the noncompete agreement. I am now wondering what the consequences of this breach of contract may be and am seeking legal advice.
Gregory F.
I would be happy to schedule a paid telephone consultation with you to review the non-compete agreement, advise you on its scope and enforceability, and answer your questions. Please contact me via email at greg@fidlonlegal.com to discuss.
Employment
Noncompete Agreement
Colorado
Can I get out of my noncompete agreement?
I am looking at my options.
Donya G.
You may be able to be released from a non compete. You would have to review the language in the non compete to see the expiration. DISCLAIMER The answers to these questions do not constitute legal advice and does not create an attorney-client relationship with the attorney and anyone who reviews these responses.
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