Non-competition agreements, also known as covenants not to compete or restrictive covenants, are employment contracts used by employers to limit the ability of an employee to compete with the employer by stealing customers or trade secrets. Enforceable agreements must strike a balance between protecting the employer's legitimate business interests from an unfair competitive advantage with the employee's right to work in a field for which he or she is trained. In general, courts decide what is considered reasonable or not reasonable by examining the type and size of the business, how long and over what geographic area the restrictions apply and whether adequate consideration, or benefit, was given the employee at the time the agreement was signed.
The Law In Colorado
In general, Colorado statutes prohibit any non-competition agreements that restrict the right of any person to receive compensation for skilled or unskilled labor. There are, however, three employment situations in which such agreements will be permitted and they are:
- When necessary to protect trade secrets, known as a "non-disclosure agreement"
- To recover training expenses for persons employed less than 2 years or
- When they involve executive or management employees or their professional staff