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Don’t Count on Your Employer’s Non-Compete Agreement to Be Dead-on-Arrival

Posted by Thomas P. Howard | May 11, 2021 | 0 Comments

By: Kammie Cuneo

Colorado has a strong public policy against worker intimidation and restraint of trade.[1] Colorado law generally voids covenants not to compete, as they restrict the rights of workers to receive compensation for skilled or unskilled labor. C.R.S. § 8-2-113(2). This law has endured for several decades and has been refined and reinforced by many court decisions over the years.[2]

But this prohibition is not without exception. That is, restrictions on employment are permitted in a few situations. So while many non-competition agreements (or clauses) are void, some are enforceable.[3] You may seek legal advice to determine whether a particular non-compete agreement, non-solicitation agreement, or employee contract is enforceable.

One instance when such restrictions are enforceable is in a contract for the sale of a businesses or of assets. Another relates to recovery of expenses for educating or training employees. Yet another is with respect to executive and management personnel or executive assistants to them.[4] Lastly, such restrictions are permitted for the protection of trade secrets.[5]

This last circumstance is one that arises with some regularity. Employers may protect their trade secrets by restricting employees from going to work for a competitor or soliciting the employer's customers, but those restrictions must be reasonable and sufficiently narrow in scope, geographical reach, and length of time to protect the employers legitimate business interests in preserving those trade secrets.[6] For employers, a key consideration is to ensure that trade secrets exist, lest any attempt to fall under the statutory exception is defeated. For employees, a prudent approach is to exercise good “separation hygiene” to prevent transmission of proprietary information from their former employer to their new one. When a departing employee takes the right steps to prevent such transmission, they are generally more protected in using their skill and knowledge in the service of the new employer.[7]

Finally, non-compete provisions may also be enforceable against independent contractors in some special circumstances, even though they are generally disfavored.[8]

[1] Dresser Industries, Inc. v. Sandvick, 732 F.2d 783, 787 (10th Cir. 1984).

[2] C.R.S. § 8-2-113, Annotations.

[3] 16 Colo. Prac., Employment Law & Practice § 7:1 (3d ed.).

[4] See C.R.S. § 8-2-113(2)(a),(b),(d).

[5] Id. § 113(c).

[6] Great Am. Opportunities, Inc. v. Kent, 352 F. Supp. 3d 1126, 1134(D. Colo. 2018)

[7] Hooked Media Grp., Inc. v. Apple Inc., 269 Cal. Rptr. 3d 406, 413.

[8] See Saturn Systems, Inc. v. Militare, 252 P.3d 516 (Colo. App. 2011) (holding that a one-year non-solicitation of customers agreement could be enforced against former independent contractor because it was primarily designed to protect trade secrets rather than to prohibit competition); but see Colorado Supply Co., Inc. v. Stewart, 797 P.2d 1303 (Colo. App. 1990) (holding that a noncompete agreement with an independent contractor is void because independent contractors are not among the stated exceptions); Smith v. Sellers, 747 P.2d 15 (Colo. App. 1987) (holding that a noncompetition agreement with an independent contractor is void).

About the Author

Thomas P. Howard

Thomas Howard is an experienced trial lawyer that handles intellectual property litigation nationwide, including copyright, trademark, trade secret and patent litigation, as well as complex civil litigation, including breach of contract, interference with contract, breach of fiduciary duty, conspiracy, fraud and fraudulent transfer of assets.


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