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Is your business’s non-compete agreement enforceable?

On Behalf of | Jun 28, 2024 | Employment Contracts

Non-compete agreements are tools used by businesses to protect their interests. These agreements restrict employees from working for competitors. In addition, they restrict employees from starting similar businesses after leaving the company. The enforceability of these agreements varies by state. In Colorado, specific rules determine whether a non-compete agreement is valid.

Understanding the legal landscape is essential for both employers and employees. Knowing what makes a non-compete agreement enforceable can help businesses draft effective contracts. The same knowledge helps employees understand their rights.

Colorado’s approach to non compete agreements

Non-compete agreements are generally not favored in the state. The laws limit the use of these agreements to protect employees from unfair terms. According to Colorado law, non-compete agreements are only enforceable under specific categories. These categories include:

  • Protecting trade secrets
  • Recovery of training expenses for employees who have worked for less than two years
  • When the employee is an executive or manager.

Reasonableness and scope

A non-compete agreement must be reasonable to be enforceable. The agreement should not impose unnecessary hardship or be broader than necessary. State courts will scrutinize non-compete agreements to ensure they are fair and justifiable. 

Consequences of unenforceable agreements

Restrictions placed on the employee will not be upheld if the criteria are not met. This could potentially leave the business unprotected. Businesses should draft non-compete agreements that align with the state’s legal requirements.

Protecting your business interests

Ensuring your business’s non-compete agreement is enforceable is essential. The process involves understanding state laws and crafting fair and reasonable agreements. By following the legal guidelines, businesses can protect themselves without imposing unfair restrictions on employees.