Non-Compete & Non-Disclosure Disputes

Non-Compete Agreements

Non-compete agreements are usually entered into by higher level executives or required as a condition of partnership or the sale of a business. The purpose is to keep a former employee or business owner from hurting the business they just left. Generally, a member of an LLC, or shareholder of a closely held corporation, will be prohibited from competing with their current company even absent a non-compete because of the requirement of loyalty and a fiduciary duty to the company.

While there has been a national trend to make non-compete agreements apply to lower level employees, Colorado only allows a non-compete to apply in certain circumstances. C.R.S.§8-2-113 makes non-compete agreements illegal in Colorado unless the non-compete:

  1. Is in connection with the sale of a business;
  2. Is included in a contract for protection of trade secrets;
  3. Requires the employee to reimburse the employer for education and training when the employee worked for less than 2-years;
  4. Applies to executive and management personnel.

Even if a non-compete is valid, it still must be reasonable in duration and geographic scope. For instance, a worldwide perpetual non-complete agreement will almost always be unreasonable. A local non-compete for 2-years will probably satisfy the test of reasonableness. The test is if the non-compete is justified by a legitimate business interest.

Non-Disclosure Agreements

Sometimes a salesperson may be bound to a non-solicitation agreement by their former employer. While the salesperson may not be among the category of persons covered under the non-compete statute, the customer lists of the employer may be a trade secret and therefore enforceable against the former employee.

Damages for Violation of Non-Compete Agreements

The damages for violation of a non-compete agreement can include an injunction prohibiting continued violation of the agreement. In addition, disgorgement of profits and potentially liquidated damages and attorney’s fees are recoverable depending on the agreement.

Contact Champagne Law Firm for a strategy session to resolve your case.