Employees rarely stay with the same company for the entirety of their careers. Because of this, many employers are concerned that they will train an employee and provide them access to confidential information, only for that employee to leave and take that information with them when they start working for a competitor.
Noncompete agreements offer one way for an employer to protect their business interests when an employee leaves the company.
However, these agreements are highly controversial, with critics saying that they unfairly limit the rights of workers and tend to depress wages.
In a law that went into effect last year, Colorado sharply limited the use of noncompete agreements. The Federal Trade Commission is currently working on a regulation that would limit their use nationwide.
A noncompete agreement will typically place reasonable limitations on the employee’s future employment in terms of:
- Geography: A noncompete may prevent an employee from finding a job within a certain geographic area.
- Time: A noncompete may prevent an employee from working for a competitor for a certain amount of time.
- Scope: A noncompete may prevent an employee from working in a certain industry.
Nowadays, courts are more likely than ever before to declare a noncompete unenforceable. To ensure the enforceability of your agreement, consider taking the following steps:
- Make sure agreement only applies to the employees that have access to sensitive information and who otherwise meet the requirements under Colorado law.
- Make sure any limitations are reasonable and specific. Vague restrictions or limitations that place undue hardship on the employee (e.g., stating that employee cannot work anywhere in the country) are likely to make the agreement unenforceable.
- Put the agreement in writing and make sure it is signed by both the employer and the employee.
- Make sure the agreement is only intended to protect legitimate business interests.
- Make sure there is consideration. If you require an employee to sign the agreement, it generally should be a condition of the job offer itself, a promotion, or some other benefit.
A noncompete agreement can have a significant impact on your career. However, breaching a noncompete can also result in serious legal consequences. If you find yourself in a dispute involving a noncompete agreement, a commercial litigation attorney in the Denver area may be able to help.