Understanding Colorado’s Non-Compete Agreements: What Employers and Employees Need to Know

Non-compete agreements are contracts that restrict an employee from working for a competitor or starting a similar business after leaving a company. In Colorado, these agreements are closely regulated to balance the rights of both employers and employees. Understanding when they are enforceable is essential for businesses and workers alike.

Colorado’s Approach to Non-Compete Agreements

Colorado law generally disfavors non-compete agreements, but there are limited circumstances where they may be enforceable. Under state law, non-competes are valid only if they fall into specific categories, including:

• Protection of Trade Secrets: Employers may enforce a non-compete to safeguard confidential information.
• Executive or Management Personnel: High-level employees with unique access to sensitive business operations may be subject to restrictions.
• Recovery of Training Costs: In some cases, agreements tied to the repayment of specialized training expenses are enforceable.
• Sale of a Business: Non-compete agreements are often valid when tied to the sale of a company.

If an agreement does not meet one of these criteria, it is likely unenforceable in Colorado courts.

Recent Changes in Colorado Law

Colorado has recently updated its rules surrounding non-competes, making it even harder for employers to enforce them. For example, agreements must be reasonable in scope and duration, and employers must provide employees with clear notice of restrictions before they are signed. These changes aim to protect workers’ ability to seek new employment opportunities while still allowing businesses to protect legitimate interests.

What Employers Should Consider

Employers should carefully draft non-compete agreements to ensure they comply with Colorado law. Agreements should be narrowly tailored, focused on legitimate business concerns, and avoid overly broad restrictions that could invalidate them.

What Employees Should Know

Employees should review any non-compete agreement closely before signing. If already bound by one, they should understand their rights and limitations, as well as whether the agreement is enforceable under Colorado law.

At Denver Business Lawyers, we can provide legal assistance to the Colorado public. Whether you are an employer looking to protect your business or an employee concerned about your career mobility, our team can help you navigate Colorado’s non-compete laws.