I love this line from the movie, Ben-Hur, and in fact, I often quote it to my employees, but I am not really the terrible employer this line might make me out to be! However, sometimes, I consult with employers who often think their workers are their servants, and the employers seek to craft employment agreements which go beyond the mark. Employers often include provisions in their employment agreements that seek to prohibit employees from working in similar businesses or locations once they leave. Commonly known as “non-competes” or “non-competition agreements” these provisions often create issues between employers and their former workers.
Colorado does recognize these agreements, but their enforcement is very fact specific. Moreover, both parties have to have a mutual understanding of what each is agreeing to; without this any agreement is subject to being unenforceable. It is also important to note that Colorado disfavors non-competition agreements because of a worker’s right to sell their labor, and the public’s interest in unimpeded trade.
Put simply, Colorado recognizes employers often have an economic advantage over employees and that employees have a right to work. Likewise, Colorado has found that non-competes have a potentially negative effect on competition in the market place. These things said, Colorado does recognize the validity of non-competes when
- they involve the sale of a business, or
- they involve the protection of trade secrets, or
- they provide for the recovery of training expenses for employees employed by the employer for less than two years, or
- they involve employees considered executives and professionals, or professional staff.
The challenge in crafting such agreements is to understand exactly what the conditions noted above are and what their scope is. For example, what is a trade secret? Who is a professional? Who are professional staff? Not knowing the answers can have serious consequences, so do not assume that you know. As I noted above these issues are very fact specific and require professional advice, particularly when involving doctors and other medical professionals.
By way of illustration, my daughter was asked to sign a non-compete as a condition for employment in another state, so she asked me to review it. It was clear to me that the agreement was unenforceable on its face; the prospective employer clearly was unfamiliar with the law and was actually attempting to prevent my daughter, a relatively low-level employee, from engaging in similar work anywhere in the country. Based on this, and other conditions, one of which was that the agreement had to be freely negotiated, the agreement was void on its face and unenforceable. So, while the employer had interests it legitimately wanted protected, it lost all protection through over-reaching.
We all know knowledge is power; get that knowledge before you act so as to keep it, and in the interim, slow the rhythm of the drum every now and then – your workers will thank you for it. Contact us if we can help.