Employees often sign non-competes when they begin working for their employer and the employee doesn’t even realize that he or she has signed a non-compete. In order to obtain a much needed job, an employee feels he or she must sign anything offered. When employees start working for a new employer they may be handed a packet of documents and asked to sign and return a number of them. The packet might include a health insurance form, a confidentiality agreement, an acknowledgment of receiving the employee handbook, and the employee handbook itself. In many cases, the packet will also include a non-compete agreement. Employees should thoroughly read and review the non-compete agreement and if they need help to fully understand its implications, they should contact an attorney.
Although there is a common misconception that non-compete agreements are always unenforceable in Colorado, that is simply not true. Each state has its own laws or court opinions governing non-compete agreements. In Colorado we have a specific statute on the issue. Colorado Revised Statute § 8-2-113 specifies the situations when a non-compete agreement may be enforceable in Colorado. There are four categories into which you may fall. If you fit in one or more of these categories, you may be bound by a non-compete agreement. The categories are:
1. You have bought or sold a business and the non-compete is part of the sale of the business;
2. You have access to trade secrets;
3. Your employer has educated or trained you and you have worked for that employer for less than two years; and
4. If you are executive or management personnel; or you are executive support staff to executive or management personnel.
If you are not in one of the above four categories then you cannot be subject to a non-compete under Colorado law. However, companies sometimes put language in a non-compete agreement that requires them to be governed by another state’s law, so you must be careful not to assume that your non-compete will be interpreted under Colorado law. You have to read the agreement to ascertain what state’s law applies.
Also, even if you fall into one of the above categories, the scope of the agreement must be reasonable. Court’s often look to the length of time of the agreement, the geographical area that is restricted, whether it is needed to prohibit unfair competition and how broadly it limits your ability to work to determine whether the agreement is reasonable.
Non-competes are often difficult to interpret. It can be unclear whether an employee falls into one of the above four categories. Also, the fact that non-compete law varies state-by-state can be confusing for employees. It can also be difficult to determine if the non-compete will be considered “reasonable.” It is highly recommended that you have an attorney review your non-compete agreement BEFORE you sign it. However, if you have already signed one, it is still advisable to have an attorney review the agreement to help you understand how it will likely be interpreted.
Finally, something very important to keep in mind is that non-competes are often still enforceable even when your employer fires you.