Non-compete provisions in employment contracts have historically been used to prevent executive-level employees from leaving a company and immediately competing with their former employer. In addition, non-compete agreements are frequently used when a business is sold to preserve the value of the business. Recently, there has been a national trend of companies attempting to prevent mid-level employees from competing with their former employees. Many employees may sign these agreements without fully appreciating the repercussions of the non-compete provision and the fact many companies routinely enforce these agreements by seeking injunctive relief and breach of contract claims through the courts. Some states have enacted particularly restrictive non-compete laws that put the burden on the employee to demonstrate they are not competing with their former employer.
Colorado courts have generally held that non-compete agreements are unenforceable unless they meet a specifically defined exception in Colo. Rev. Stat. §8-2-113. The exceptions include when the non-compete is included as a condition of the sale of a business or trade secrets; as a condition for employer provided education; and when it restricts executive and management personnel. Even if one of the exceptions in Colo. Rev. Stat. §8-2-113 applies, the provision must still be reasonable in scope, geographic area and time.
Ultimately, the enforceability of a non-compete agreement depends on many factors. Just because a non-compete provision is included in an employment contract (or a contract for the sale of a business) doesn’t necessarily make it enforceable or enforceable to the extent written. In addition, even if there is not a non-compete agreement in place, that doesn’t mean there are not remedies available to an employer if a former employee engages in surreptitious activities to undermine their former employer.