Protecting the Rights of Employers and Employees
Although courts are suspicious of non-competes, they protect legitimate company property and its business goodwill. Some activities that non-competes forbid are already against the law, such as divulging trade secrets, for example. A non-compete adds an additional penalty, breach of contract, to existing legal penalties. Other activities, such as working for a competitor, are not otherwise illegal.
Non-competes protect employees as well, although these protections are typically inserted into the contract language by substantive law. State and federal law prevent a non-compete from indefinitely or unreasonably restricting an employee’s right to work for a competitor or work in a certain industry, for example.
Protecting the Rights of Business Buyers
The purchaser of a business buys not only its physical assets, such as its factories but also its intangible assets, such as its intellectual property and its trade secrets. The buyer does not want the seller to compete with it by using the business’s proprietary knowledge that the buyer has already purchased.
As such, a non-compete agreement, either stand-alone or as part of a merger and acquisition or a purchase and sale agreement, is almost always a necessary part of a business purchase agreement. Just as with an employer-employee non-compete agreement, any non-compete restrictions must be reasonable in time and geographic scope.
Our Scope of Legal Services for
Non-Compete Agreements in Colorado
Sequoia Legal is a business law firm in Denver, Colorado. Our Colorado non-competition attorneys help our clients to negotiate, draft, review and implement Colorado non-compete agreements. These agreements must be reasonable in scope and duration, detailed, agreeable to both sides, and, above all, enforceable. We also provide noncompete litigation services in the event a non-compete is breached.
Our Successful Cases
Legal Standards for Non-Compete Enforcement in Denver, CO
Colorado non-compete law forbids non-compete agreements except for certain specified purposes:
Trade Secrets and Proprietary Knowledge
Colorado's non-compete law allows you to use non-competes to protect trade secrets. The main reason for this is that trade secrets, while valuable, enjoy almost no formal legal protections. Think of the formula for Coca-Cola, for example. Colorado law sets certain standards that proprietary knowledge must meet to be considered trade secrets.
Sale of a Business — Buyer Protection
A non-compete agreement incident to the sale of a business should place specific but reasonable restrictions on the seller’s freedom of action after the completion of the sale of the business. The seller should not be able to use his or her intimate knowledge of the business to undermine the buyer. Nevertheless, the seller should not be burdened with unreasonable restrictions.
Management, Executives or Professionals
Management, executives, and professionals are vital to the success of a company. Due to their knowledge of company confidential information, they can bring the company down if they share their knowledge with a competitor. Employers are allowed to negotiate reasonable restrictions on the ability of these critical personnel to work for competitors. Many sales and director-level or higher positions require a non-compete clause in the employment contract.
Additional Enforcement Considerations
A non-compete agreement must be reasonable in duration and geographic scope, and it must be reasonable on the whole. In addition, employers or business owners need to consider other issues for non-compete agreements enforceable in Colorado, such as:
- How to protect themselves against leaks by independent contractors (who are not bound by employment agreements);
- What non-compete restrictions should be placed on current employees;
- What defenses an employee or former employee might assert to have a non-compete agreement declared unenforceable.
It is also important to keep up with changes in non-compete agreements under Colorado law. What may be acceptable today might not be acceptable tomorrow. Restrictive covenant agreement lawyers routinely keep up with these changes, in addition to other common non-compete agreement exemptions for each client’s respective industry.
Recent Updates to Colorado Non-Compete Agreements Law
There have recently been new changes to Colorado law regarding non-compete agreements. The law now requires that all agreements contain language indicating that their purpose is to protect trade secrets, that agreements are no broader than necessary to protect a business's trade secrets, and that they are only used for employees earning above $101,250 in salary as of 2022.
Who We Assist
- Employers
- Employees
- Executive and management personnel
- Buyers and sellers of businesses
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