The purpose of allowing non-compete obligations in this context is simple: if a buyer of a company was not able to protect his purchase from the goodwill of the company, the sellers of the company could simply start a new business and take their former customers with them, thus making the buyer`s purchase useless. Non-compete obligations can prevent this, as sellers would be prevented from working in a competing industry or developing a competing business, at least for a certain period of time, which would allow the buyer to benefit from their purchase. See King v. PA Consulting Group, Inc., 485 F.3d 577 (10th Cir. 2007) (one of the objectives of non-compete obligations is to prevent the “brain drain” of the company). Non-compete laws vary considerably from state to state. While in Florida such agreements are quite easy to enforce, in California, these agreements are almost always rejected by the courts. Colorado is one of those states where non-compete obligations are difficult, but not impossible, to enforce. A non-compete obligation cannot be excessively restrictive.
Companies must protect themselves from unfair competition, but not from all competition. Competition is a necessary and valued part of free trade in the United States. In addition, people must have the ability to remain active members of society through gainful employment, and non-compete obligations limit a person`s ability to do so. It is important to note that R.S.C. ยง 8-2-113(2), the Colorado No-Compete Act, does not contain any specific language covering remedies for non-compete violations. Therefore, the normal principles of damages apply to non-compete obligations, which means that, if the applicant wins, it can recover the net loss of profits resulting directly from the breach. If you have already signed a non-compete agreement, it makes sense to consult qualified legal counsel such as Hansen Law Firm to help you understand your rights and obligations under the agreement. It would be tragic to simply assume that you are subject to the limits of a non-compete obligation if a qualified lawyer could review your agreement and tell you otherwise. The third category to which enforceable non-compete obligations can fall are agreements that limit the ability of managers, management and their professionals to work for competitors. Like other categories of non-compete obligations, whether a person qualifies as a manager, manager or specialist and whether the agreement is appropriate are questions of fact to be decided by the court of first instance. See Porter Industries, Inc.c.
Higgins, 680 P.2d 1339, 1342 (Colo. App. 1984). The use of a non-compete agreement when purchasing a business can help protect the value of the business being purchased. For example, Colorado lawmakers have explicitly allowed non-compete obligations related to the sale of businesses. As a general rule, non-compete obligations are not allowed in Colorado unless the agreement explicitly falls under an exception: this is particularly relevant for low-wage workers. About 18 percent of the U.S. workforce has signed non-compete agreements, and many of those workers are considered low-income people (who bring in less than $40,000 a year). A restricted non-compete obligation where and for whom an employee can work after leaving a workplace. Such restrictions are generally intended to protect the former employer from the disclosure of its trade secrets by a former employee to a competitor or from wasting resources to train a new employee simply to bring those new skills to a competing company. Non-compete obligations generally prohibit an employee from working for a competitor for a certain period of time after leaving the company and in a specific geographic area. Non-compete obligations that are not covered by any of these exceptions generally cannot be enforced in Colorado.
It is important to note that even if an agreement falls into one of the above categories, this does not automatically mean that the agreement is enforceable. Instead, Colorado courts have established additional requirements that the non-compete code must meet to be enforceable. Since the policy of allowing non-compete obligations in the sale of a company is focused on goodwill, the adequacy of a non-compete obligation and therefore its enforceability depend on whether the restriction of competition offers adequate protection for the acquisition of that goodwill by the buyer. If a restriction is too broad or too onerous, it will be deemed unenforceable. See Reed Mill & Lumber Co., Inc.c. Jansen, 165 P.3d 733 (Colo. App. 2006) (Determination of a non-compete obligation that is not enforceable if its application for an employee shareholder was deemed inappropriate six years after the purchase of the company). In LS3 Inc.c.
Cherokee Federal Solutions, L.L.C. (D. Colo. 9/29/2021) (Brimmer, C.J.), a former employer sued several former employees for (among other things) violating their non-compete obligations. Presiding Judge Philip Brimmer of the U.S. District Court for the District of Colorado rejected Maryland`s choice of law to govern the agreements by the parties, ruling that the agreements were subject to Colorado`s non-compete obligation and were unenforceable. Specifically, Colorado courts conducted a two-step analysis to determine whether a non-compete obligation for trade secrets is enforceable. First, the presidential court must examine the facts to determine whether an agreement restricting competition is justified.
On the other hand, the court of first instance must examine the specific conditions of the non-competition obligation in order to determine whether its effect is appropriate. Only if a non-compete obligation is justified and reasonable is it enforceable. See Saturn Systems, Inc.c. Militare, 252 p.3d 516 (Kolo. App. 2011). There are also concerns if you are laid off and have to look for another job. A non-compete obligation in this case can prevent you from getting a new job, affecting your ability to maintain a standard of living. Once a Colorado company demonstrates that a non-compete obligation is permitted, it must prove that the agreement is appropriate. Non-competition agreements must establish restrictions that limit the scope of the agreement. If the restrictions are inappropriate, there is a risk that the non-compete obligation will not be enforced.
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