Colorado Non-compete Agreement Template

A non-compete agreement is a type of contract seeking to restrict the employees (and sometimes contractors or other companies) from unfair competitive practices against the employer. As a rule, NCAs prevent executives and key personnel from being employed by direct competitors of their former business entity. Through such a non-compete agreement template, companies protect their interests, confidential information, intellectual property, and trade secrets. On the other hand, they can make it difficult for a person to earn a living.

Colorado NCA Laws and Restrictions

Laws regulating non-compete agreements vary across the United States. Colorado is among the states where such contracts are difficult to enforce. There, NCAs are presumptively void as provided for by the Colorado Revised Statutes (Section 8-2-113) that prohibits any agreement that doesn’t allow a person “to engage in any lawful occupation at any place they see fit.”

Thus, Colorado NCAs are legal only if they are subject to one of these four exceptions:

NCA for Executive and Management Personnel

When entering an NCA with top managers or leading specialists, a company owner should demonstrate that such an employee is among key decision-makers having access to insider’s in-depth information about the company’s business processes. Whether it is top managers or mid-level employees, it is necessary to explicitly describe their job responsibilities and prove their access to sensitive information hidden from public knowledge.

NCA for Reimbursement of Employee’s Training or Education Costs

Companies usually serve such NCAs if the training period is less than 24 months. An NCA is legitimate if it contains the so-called training reimbursement clause. It is an obligation to reimburse employees’ training costs. The employee can commit to serving the company for a period specified in the NCA.

NCA for Protecting Trade Secrets

In Colorado, it is allowed to enforce NCAs for the sake of trade secret protection. But to make such a contract valid, the trade secret must be assessed according to six criteria, including:

  1. Whether anybody outside the company is aware of or can access the information.
  2. Which employees inside the company know this information.
  3. Measures the company takes to keep its information confidential.
  4. The trade secret’s commercial value and benefits to its holder.
  5. Money and efforts spent to develop the trade secret.
  6. The cost and time required for competitors to acquire such information.

NCA for Purchase of Business

When a party buys somebody’s business, it makes sense for the new owner to protect the purchased business against competition from the ex-owner, considering they have detailed knowledge of the company. In Colorado, this legal exception makes NCAs enforceable.

Popular Local NCA Forms

Non-compete contracts are accepted and enforced to a varying degree by most US states, making them quite widespread amongst lots of organizations. Learn about the most popular states requested by our website users concerning non-compete contracts.

Creating a Valid Non-Compete Agreement

To be valid in Colorado, an NCA subject to one of the mentioned exceptions must be reasonable as assessed by three criteria on a case-by-case basis:

  • Duration of the implied restrictions. The period should not be longer than necessary; it should be about two years.
  • The geographic scope of the limitations (depending on where the company is located).
  • Whether the NCA is overly restrictive. Companies can only try to prevent unfair competition against them but cannot prohibit a person from being employed and engaging in any competitive activities.

Besides, an NCA must be supported by consideration.

Required NCA Terms and Conditions

In the state of Colorado, the NCA text must comprise the six elements listed below:

1. Introduce the parties to the Agreement, including the full names of the employer and the employee.

2. Details of the employee’s restrictions. The range of obligations usually includes the promise:

  • not to offer competitive products or services
  • not to run the same business (especially with the company’s customers)
  • to avoid operations with the company’s general or specific competitors
  • to avoid partnership or cooperation with the company employees, whether current or former

3. The agreement’s validity period, and whether it comes into force once employment begins or ends.

4. Whether a company allows canceling the agreement through the payment of the purchase option. In this case, the employer releases the employee from any liability under the agreement for a certain amount of money.

5. Governing jurisdiction, which in  Colorado means competent authorities of this particular state.

6. The effective date, signatures, and full details of the parties to the agreement.

Other Colorado Forms

Other fillable Colorado templates available for download on our site and that can be customized in our simple document constructor.

Published: Feb 10, 2021