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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Benjamin V.
My practice involves counseling businesses and individuals on a variety of contracts, such as business formation, technology/IP, real estate, leases, and even domestic relations agreements. Much of my practice is dedicated to litigation. As such, I approach contract and transactional work from a litigation perspective by advising clients of the risks involved in failing to develop proper contracts. It takes more than knowledge of the law to be a good lawyer. A good lawyer is honest and forthcoming with clients and has a counseling ethos. And, to me, a good lawyer stands in the shoes of the client when considering how to best serve that client. Whether my client is a business or an individual, I am passionate about helping my clients understand their rights, responsibilities, risks, and possibilities.
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Alex F.
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Employee Rights
Noncompete Agreement
Florida
Noncompete agreement geographic scope?
I recently left my job of five years and have been offered a new position with a competitor. The new employer has asked me to sign a noncompete agreement. I am concerned about the geographic scope of the agreement and need to understand what areas it would cover, and if it would prevent me from taking a position with a competitor in another state or country.
Daniel D.
The Courts use a reasonableness standard determine if a non-compete is reasonable in time and geographic scope. It would be necessary to see the non-compete to tell you what it says, the areas it would cover and if it would prevent you from taking another position.
Employer
Noncompete Agreement
Connecticut
Can a noncompete agreement be waived?
I am a small business owner in the retail industry and I am looking to hire a new employee. The employee has a noncompete agreement with their previous employer that I am concerned about. I want to know if it's possible for the agreement to be waived so that I can be sure I'm making the right decision in hiring this employee.
Thomas L.
Yes, the parties to contracts can always agree to amendments and waivers. However, the former employer may have no interest in waiving the contract in this particular situation.
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.
Contracts
Noncompete Agreement
Florida
Noncompete agreement choice of law?
I recently accepted a job offer with a new employer and they sent me a Noncompete Agreement to sign. I have some questions about the agreement, specifically related to the choice of law. My former employer and I are in different states, and I want to make sure I understand the implications of the agreement before signing.
Venus C.
Congratulations on your new job. Generally, a choice of law clause contained in a non-compete agreement indicates which state law will govern the contract. By way of general example, let's pretend we have a non-compete agreement that states the choice of law is Florida. Let's also pretend the parties to this agreement had a dispute and one party filed a lawsuit against the other in the state of New York. In this pretend scenario, because the parties agreed Florida to be their choice of law for the non-compete agreement, the court in New York would abide by that contractual agreement and apply Florida law. While choice of law clauses are commonly used to indicate what law will apply to a contract, the language used or omitted plays a significant role in their interpretation and enforceability.
Employment
Noncompete Agreement
Connecticut
Noncompete agreement and change of control?
I recently accepted a new position with a company that has requested that I sign a noncompete agreement. I understand the agreement and the limitations it puts on me, but I am concerned about how the agreement would be affected if the company is sold or changes ownership in the future. I would like to understand my legal rights in the event of a change of control.
Thomas L.
If the future company buys the equity of your current employer, the Non-Compete continues in effect. If the future company buys the assets, the Non-Compete is terminated. I would request a sentence be added to the effect that "if there is a change of control of the Company (meaning more than 50% of the equity interest or 50% of the voting equity control) is sold or transferred, then this Non-Compete Agreement is terminated.
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