It’s the dream: You come up with a plan to cut through the internet’s layers upon layers of clutter and speak directly to your potential customers or clients. And if you can bring this idea to life, you’ll want to protect it, but will your noncompete agreement prove enforceable?
Colorado business owners may be surprised to learn how often their noncompete agreements are worth less than the paper they’re printed on. You want your agreement to protect your trade secrets and to uphold your goodwill in the market, but if you don’t draft and use it correctly, the court might simply declare it void.
Colorado law and your noncompete agreement
Some states simply don’t acknowledge noncompete agreements. For the most part, this is also true in Colorado. The law takes the general view that noncompete agreements denote the use of “force, threats, or other means of intimidation” to prevent people from entering the workplace, but it allows for exceptions when the noncompete serves any of four specific purposes:
- To safeguard the purchase or sale of a business or its assets.
- To protect a company’s trade secrets.
- To limit future competition from former executives, managers and their professional staff.
- To recoup the investment a company makes in educating and training an employee who stays with the company for less than two years.
For your noncompete to be enforceable, it needs to aim directly at one or more of these exceptions, but that’s not all. In the case of a dispute, the court will evaluate whether the agreement focused narrowly enough on protecting your company’s interests and didn’t assign your former employee any undue hardships. To this end the court may review the restrictions your agreement imposes, including:
- Restricted activities
For example, imagine you’re hiring independent contractors to develop code for an innovative, internet-based distribution system. You might want to work with an attorney with noncompete experience to write the agreement to prevent the contractor from sharing your code secrets with your competitors but that won’t prevent the contractor from seeking other coding work.
Protect your competitive advantage
Colorado won’t recognize every noncompete agreement, especially if one appears to overreach, but a good noncompete agreement might help you protect your trade secrets or defend yourself if competitors try to poach your executives and management. The key is to make sure you’re using your noncompete to protect your business and not to hinder your employees.