Many, if not most, employment contracts include “non-compete” provisions that attempt to limit an employee’s ability to work after they quit or are terminated by an employer. Also, even employees who do not otherwise have contracts may be asked to sign a stand-alone non-compete agreement. One commonly held belief is that non-compete agreements are not enforceable in Colorado. This is only partially true.
Although Colorado’s non-compete statute provides that generally, non-compete agreements are void, certain exceptions exist that can impact an employee’s ability to work in the same industry following termination. The non-compete statute, § 8-2-113, C.R.S., includes important exceptions that should be considered when signing an employment contract or when being asked to sign a stand-alone anti-competition agreement by an employer. If the non-compete agreement is “for the protection of trade secrets” or is between the employer and “executive and management personnel and officers and employees who constitute professional staff to executive and management personnel,” the non-competition provision may be enforceable.
Whether a particular position constitutes “executive and management personnel” “professional staff to executive and management personnel” is a fact-intensive question that cannot be analyzed in a vacuum. For example, a non-compete may be enforceable against some commission-sales personnel but not others. That an individual holds an executive title or works in a “profession” may not be determinative as to the enforceability of a covenant-not-to-compete.
Outside the standard “non-compete,” Colorado law allows other forms of such agreements such as agreements requiring employees to re-pay education and training expenses if the employee has worked for the employer for less than two years. Additionally, provisions in physician employment contracts or shareholder agreements that require payment of damages for competition may also be enforceable under Colorado law. Virtually every contract signed by a doctor contains one of these provisions. When a physician is leaving a practice, it is vitally important that these provisions be examined carefully to determine whether the provision is effective and enforceable.
Covenants not to compete, or non-compete agreements, are often misunderstood by both employers and employees. When considering whether to sign one of these agreements and the enforceability of the agreements, both employers and employees should consult with attorneys experienced in the drafting and enforcement of these non-compete provisions.
For more information, contact Miller Kabler, P.C.