Colorado, like many states, has a strong public policy against enforcement of non-compete clauses. By statute, “[a]ny covenant not to compete which restricts the right of any person to receive compensation for performance of skilled or unskilled labor for any employer shall be void.” Colo. Rev. Stat. 8-2-113(2). However, there are narrowly construed exceptions to the general restriction on enforcement non-competes falling in the following categories for most business disputes:
- restrictions on competition in the context of the sale of a business;
- agreements for the protection of trade secrets;
- agreements applying to executive or management personnel or their professional staff.
Even where Colorado law does not bar enforcement by statute, the scope of a non-compete must still be reasonable in terms of its duration and geographic scope. Nat’l Graphics Co. v. Dilly, 681 P.2d 546, 547 (Colo. App. 1984). To be reasonable, a non-compete agreement must not be broader than necessary to protect the legitimate business interests, and it must not impose undue hardship on the employee. Reed Mill & Lumber Co., Inc. v. Jensen, 165 P. 3d 733 (Colo. App. 2006). The concept of reasonableness can vary based on the facts of the case, and proving hardship alone would not necessarily defeat a non-compete.
Courts considering the application of the statute in Colorado will seek to effectuate its purpose. Its purpose, viewed from either the employer or employee, can vary in terms of the arguments raised– either effectuating the general purpose that finds most noncompete agreements void, or allowing the enforcement of a noncompete agreement when the facts of the case meet one of the statutory exceptions. Having experience on both sides of non-compete disputes is invaluable in knowing the claims and defenses that can be presented.