Is Your Non-Compete Agreement Enforceable? Here’s 4 Ways to Know

Non-Compete Agreements

We find that many people have misconceptions regarding the enforceability of non-compete agreements in Colorado.  These are agreements entered into between employer and employee – usually something the employee signs when they first start.  When the employment terminates, the employee is prohibited for working for a competitor or some other class of business within a certain zone for a certain time.

Some people assume that these agreements are completely enforceable.  Some believe that they are never enforceable.  The reality is far more complicated.  In Colorado, C.R.S § 8-2-113 provides that non-compete agreements are not enforceable, except in four listed exceptions:

1.  Sale of Business.

If one sells a business, then a non-compete agreement agreed to as part of the transaction may be enforceable.

2.  Protection of Trade Secret.

The courts will enforce a non-compete agreement if necessary to enforce a trade secret provision.

3.  Specialized Training

If you have been trained by your employer at a significant cost to your employer and then leave, the employer may be able to recoup training costs.

4.  “Professional Staff”

Non-competes may be enforced if they involve executive and managerial or professional staff of executive and managerial personnel.  This applies only to high-level and managerial employees.

Reasonableness

Finally, even if the non-compete agreement is covered by one of these exceptions, it still must be “reasonable” as to scope, time, and location.  Finding what is “reasonable” depends on the type of businesses involved and the industry.

In Summation

The time to know the effect of a non-compete agreement is before you sign it, so if the meaning of your contract is not clear, you should consider having it reviewed by an attorney.  Similarly, if you’ve left employment or thinking about it, you should consult with an attorney regarding whether your business plan is impacted by a non-compete agreement.

Sam Ventola has a wide variety of experience in employment, employment litigation, legal education, and employment transformational mediation.  When he is not helping business owners, he enjoys volunteering in his community and spending time with his family, especially his grandson, Jack.

Ventola Law serves the Denver Metro area including Arvada, Aurora, Boulder, Brighton, Commerce City, Castle Rock, Golden, Lakewood, Littleton and Arapahoe, Adams, Douglas and Jefferson Counties.