Colorado recently enacted a law that severely restricted an employer’s ability to enforce a non-compete agreement.
A non-compete agreement is something an employee is asked to sign when starting or leaving a job, agreeing that they will not work for a competitor once they leave the company.
The new law
Previously, Colorado law allowed employers to enforce non-compete agreements against executives and professionals when they leave the employer. However, now the law states that employers cannot force or prevent an employee from leaving for another job.
Education and training
There are some exceptions to this rule. Employers can recover expenses for educating and training an employee, but only if the employee has worked there for less than two years.
It is not entirely clear yet what type of education and training falls under the exception, but generally, basic training for the daily job functions likely won’t, while an employer covering the cost for an employee to receive a formal degree or certification will.
Another exception involves confidentiality. Employers may still have employees sign a confidentiality agreement if it is reasonable and relevant to the employer’s business. Any confidentiality agreement cannot prevent an employee from disclosing publicly available information or information they gained from their own knowledge or experience.
Purchasing and selling a business
The third exception relates to the purchase and sale of a business. A non-compete agreement can be used in this situation only to the extent that it protects the purchaser’s goodwill.
A final exception allows an employer to ask an apprentice to repay a scholarship if the apprentice does not follow the terms of an agreement.
Outside of these exceptions, the new law essentially voids non-compete agreements in Colorado. If you are asked to sign one, it is best to not sign it until you have had it thoroughly reviewed to make sure that all terms in it are legally enforceable.