Non-Compete Agreements in Colorado are Rarely Enforceable

Non-compete agreements are common enough that most people are familiar with what they are – but to keep everyone on the same page, a non-compete is an agreement restricting a person from competing against the business after that person is no longer working for the business. In normal situations, non-compete agreements don’t pose much of a problem. But we haven’t seen normal in quite some time, as businesses are closing and people are being laid off in record numbers. So what do you do when you’re the one who signed a non-compete agreement? Furthermore, what can you do when a professional that you have been working with and already established a relationship with says that they can no longer work for you because of a non-compete agreement?

For example, consider a homeowner who hired a real estate agent to list their home before the Coronavirus pandemic. As the virus spread, the homeowner decided to de-list their home until the effects on the market were clear and the economy had recovered. Now, the homeowner wants to re-list their home, but the real estate agent they had developed a relationship with no longer works with the same real estate broker and refuses to work with the homeowner on the basis of a non-compete agreement with their former broker. Does the real estate agent have to forego a client, and does the homeowner have to find a new real estate agent?

Fortunately for both the agent and the homeowner, non-competes in Colorado are not enforceable, subject to a few exceptions. Specifically, only non-compete agreements that apply to (i) the purchase and sale of a business or the assets of a business, (ii) the protection of trade secrets, (iii) the recovery of training expenses in certain situations, or (iv) executive or management personnel may be enforceable. Agreements that purport to restrict competition in other situations are void and unenforceable. Even in the enumerated situations above, the agreement may still be unenforceable if intimidation was involved. In other words, Colorado frowns upon limiting lawful occupation and competition and such agreements will be rarely worth the paper they are written on.

This is not to say that if you signed a non-compete agreement then you can just tear it up and throw it away. Even if the portion of the agreement limiting competition or employment is void, other provisions of the agreement may still be binding. Thus, it is always advisable to have an attorney review the contract to determine what, if anything, you need to pay attention to before you make any big decisions. Fortunately, if you’ve already skipped this step and your former employer is threatening legal action or has already filed a lawsuit against you for violating a non-compete agreement, Colorado also provides attorney’s fees to any party who prevails in a lawsuit that lacked substantial justification.

If you signed a non-compete agreement and are wondering whether it is binding, or if your business uses non-competes and wants to know if they are enforceable or a liability, contact Elevated Law for a free consultation with an attorney experienced in business law.

–By Tony Nasser, Esq., Elevated Law

Tony Nasser is the Founder of Elevated Law, licensed to practice law in Colorado and California.

The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.