Also, you may have already turned down other job offers just to be required to sign an agreement as a condition of employment. Some argue that this deprives workers of their ability to make an informed decision. Therefore, employers should announce all non-compete obligations prior to the hiring phase. It`s important to note that Colorado law distinguishes between agreements not to refer customers and agreements not to hire employees. In Phoenix Capital, Inc.c. Dowell, 176 pp.3d 835 (Colo. Ct. App. 2007), the Colorado Court of Appeals noted, „An agreement not to attract customers is a form of agreement not to compete.“ As with other non-compete obligations, the courts consider that agreements do not attract customers unfavourably. However, there are fewer restrictions on agreements not to recruit employees.
• All employees should sign non-disclosure agreements, and all managers should sign strong solicitation and non-competition clauses. What is reasonable may vary from situation to situation, depending on the type of business. For example, an agreement not to refer customers may only be appropriate within a 10- or 20-mile radius if the business is a retail store. However, an agreement not to attract customers may be appropriate within a radius of 100 or 200 miles for a more specialized company. Non-compete obligations are a growing but controversial area of labour law. While such agreements help companies protect their interests and trade secrets, if they go too far, they can make it difficult for a person to find work and earn a living. As PBS Newshour reports, nearly 40 percent of Americans have signed a non-compete agreement, but unfortunately, many of them and even some employers don`t know what such agreements do or if they are enforceable. Below is an overview of the considerations underlying non-compete obligations and their effectiveness in Colorado.
Non-compete laws vary considerably from state to state. While in Florida such agreements are quite easy to enforce, in California, these agreements are almost always rejected by the courts. Colorado is one of those states where non-compete obligations are difficult, but not impossible, to enforce. Baird Quinn regularly represents companies and employees with respect to non-compete obligations, solicitation and trade secrets. Our business lawyers have extensive experience in advising on the applicability of non-compete obligations and non-competition clauses, drafting such provisions and prosecuting and defending trade secrets and non-compete obligations. We understand that when it comes to disputes between trade secrets and non-compete obligations, clients need immediate access to competent and aggressive lawyers to protect their interests. See current decisions: Favourable Judgment-Non-Competition-Case; Injunction-registered-non-competition agreement. Agreements that are too general or not defined in individual clauses can be extremely difficult to enforce.
To that end, some States have chosen to declare such agreements unenforceable. In addition, agreements which impede the general interest may also be annulled in the best interests of the consumer. Non-compete obligations are highly controversial, especially when some companies use non-compete obligations to make it harder to find a new job, even for low-income workers. A sandwich chain in Florida, for example, recently made national headlines when it used non-compete clauses to prevent its sandwich makers from working for competing restaurants. The most negotiated trade secret includes customer lists and information. A customer list should not be a trade secret if a company has not treated it as „secret“, that is, if it has taken appropriate measures to protect itself from disclosure to others. At a minimum, a company should protect the confidentiality of customer information by restricting access to information, requiring employees to enter into non-disclosure agreements, and marking or labeling the information as „confidential.“ See S.R.C. § 8-2-113. Colorado`s non-compete obligation also contains a specific provision regarding non-compete obligations with physicians. This provision is null and void „any obligation not to compete with each other and which restricts the right of a physician to practise medicine“. This provision does not prevent doctors from performing their medical duties, even if they have accepted such a restriction in a contract of employment or partnership.
However, Colorado`s non-compete clause also provides that other provisions of a physician`s agreement are enforceable, including provisions requiring the payment of damages in an amount „reasonably related to the harm suffered.“ Thus, while a doctor cannot be prohibited from competing on the basis of a non-compete obligation, he may be ordered to pay damages resulting from a breach of a non-competition obligation. However, such damage must be reasonably related to the „harm suffered“; otherwise, the provision will not be applied. See Clauses on the Applicability of Liquidated Damages in Non-Competition Agreements between Physicians. If you have already signed a non-compete agreement, it makes sense to consult qualified legal counsel such as Hansen Law Firm to help you understand your rights and obligations under the agreement. It would be tragic to simply assume that you are subject to the limits of a non-compete obligation if a qualified lawyer could review your agreement and tell you otherwise. Simply put, although R.C. Article 8(2)-113 addresses the issue of the non-compete obligation and its legality in Colorado, it unfortunately does not provide sufficient detail and explanation to guide those who might be subject to such agreements. For example, the law leaves it to the courts to determine who is considered „high-level and managerial personnel“ and what restrictions, if any, are necessary to protect suspected trade secrets. A common and important provision in many employment contracts for executives is a non-compete clause and/or a non-solicitation clause (also known as restrictive agreements). In most States, there are limits to the applicability of non-compete obligations.
The company usually needs a good reason (beyond normal contract law) to enforce a non-compete obligation. For example, in Colorado, non-compete rules are invalid unless it`s particularly relevant for low-wage workers. About 18 percent of the U.S. workforce has signed non-compete agreements, and many of those workers are considered low-income people (who bring in less than $40,000 a year). Under Colorado law, the parties` choice of law to govern their contract is respected unless (1) „the application of the law of the chosen state runs counter to a fundamental policy of a state,“ which (2) „has a much greater interest than the chosen state in determining the particular matter.“ See King v. PA Consulting Group, Inc., 485 F.3d 577 (10th Cir. 2007). In LS3, Brimmer J. found that Colorado had a much greater interest than Maryland in challenging the non-compete agreements, as all but one of the individual defendants lived and worked in Colorado, whereas the only connection to Maryland was that the plaintiff employer was registered there. The judge then concluded that the application of Maryland law to the dispute would violate a fundamental Colorado policy because (1) the Colorado no-compete agreement is a fundamental state policy, and (2) the non-compete agreements would have been enforceable under Maryland law but would not have been enforceable under Colorado law. Therefore, the judge concluded that the agreements were null and void and unenforceable.
In LS3 Inc.c. Cherokee Federal Solutions, L.L.C. (D. Colo. 9/29/2021) (Brimmer, C. J.) a former employer sued several former employees for (among other things) breaching their non-compete obligations. Presiding Judge Philip Brimmer of the U.S. District Court for the District of Colorado rejected Maryland`s choice of law to govern agreements by the parties, ruling that the agreements are subject to Colorado`s non-compete obligation and are unenforceable.