After working as an employee in Colorado for years, you have finally summoned the courage to band together with a few colleagues to form your own business. As you prepare to leave the office on your last day, your now-former boss asks you what your plans are.
After you inform him or her of your intentions, he or she politely, yet in a matter-of-fact manner, reminds you that you signed a non-compete agreement when you were initially hired. Does this now throw a wrench in your plans?
Not necessarily. Many states have ruled that such agreements are not enforceable. Fortunately for you, Colorado happens to be one of them. Section 8-2-113 of the state's Revised Statutes says that any contractual covenant prohibiting you from performing any skilled or unskilled labor for which you may be compensated is automatically considered to be void.
The only exceptions to this rule are:
- Contracts regulating the sale of a business or certain business assets
- Contracts meant to protect trade secrets
- Contractual provisions that provide for the repayment of professional education and training
- If you served as an executive or manager (or as a direct member of an executive or manager's professional staff)
Specifically, in regards to the third exception, you have to have only worked for the company for less than two years for this exception to apply.
Furthermore, the law prohibits your former employer from using threats or intimidating tactics for you and others to pursue a career in whatever field or capacity you see fit. Thus, it cannot use the threat of litigation to try and deter you from your new venture.
Additional Discussions on Non-Compete Agreements
There are some possible issues associated with unneeded non-compete agreements. If you are required to sign such an agreement, you may find that consequences are often poorly communicated, leaving you with an inadequate understanding of what an agreement entails.
Additionally, you may have already rejected other job offers only to be obligated to sign an agreement as a condition of employment. Some claim that this deprives workers of their ability to make an informed decision. As a result, employers should make any non-compete agreements known before the hiring phase.
There are also concerns if you are fired and must seek alternate employment. A non-compete agreement can prevent you from securing a new position in this case, thereby hampering your ability to maintain a standard of living.
This is especially relevant to low-wage workers. Approximately 18 percent of the American workforce have signed non-compete agreements, and many of these workers are considered to be low earners (bringing in less than $40,000 annually).
Agreements that are too broad in scope or that lack definition within individual clauses can be extremely difficult to impose. To this end, some states have elected to nullify those agreements that are deemed unenforceable. Additionally, agreements that inhibit public welfare may also be nullified in the interest of consumer well-being.