Non-Compete Agreements – What You Should Know
In Colorado “non-compete agreements” are presumptively void and are only valid if they meet one of four requirements:
- The covenant is made in connection with the sale of a business;
- The contract protects trade secrets;
- The contract recovers an employee’s training or education costs; or,
- The contract is for “executive and management personnel” or “officers and employees who constitute professional staff to executive and management personnel.” C.R.S. § 8-2-113(2)
If the non-compete agreement falls within one of the statutory exceptions and the restrictions on competition are reasonable under the circumstances, then the courts should enforce the non-compete agreement.
Colorado extends the “executive and management personnel” category to include even mid-level supervisors who lack key decision-making authority. Generally, so long as the employee is at the top level of compensation and at least at the start of the decision-making level, with some amount of autonomy, then that employee will fall within the statutory exception for management and executive personnel. Further, Colorado courts have expanded the exception to also include officers and employees who constitute “professional staff” to management and executive personnel. The exception applies to individuals who qualify as “professionals” serving as key members of the manager’s executive staff and are involved in the implementation of management or executive decisions.
Finally, the Colorado Supreme Court recently decided that continued at-will employment is sufficient consideration for a non-compete agreement entered into after hire. Thus, if the non-compete agreement fits into one of the four statutory requirements and is reasonable in scope, time and geography, it is supported by sufficient consideration with the continuation of “at-will” employment alone regardless of when the agreement is entered into. While this may not seem fair, it does make sense as an at-will employee could simply be fired for not signing the agreement, so continued employment would be a benefit of signing the agreement. This may not be the case in other states however. If you are a contract employee however, such an agreement, without consideration, would most likely not be enforceable.
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