Enforcing non-competes against former employees in Colorado.

• Author: Moore, Steve

The recent court battle between Microsoft and Google over Google's hiring of a former Microsoft executive has brought the issue of employee non-compete agreements to the forefront. Microsoft's suit alleges that if its non-compete agreement with the executive is not enforced, its top technology secrets may be stolen.

These days, software giants aren't the only ones trying to keep their trade secrets secret. Businesses in many different industries are more frequently using employee non-compete, non-disclosure, and non-solicitation agreements to protect their proprietary inventions, business plans, and customer lists. Colorado law, however, places some restrictions on the enforceability of these agreements. Employers need to comply with the law if they hope to prevent a departing employee from carrying off their "crown jewels" to competitors.

COLORADO'S NON-COMPETE RESTRICTIONS

A Colorado statute invalidates non-compete agreements except in these limited circumstances: (1) contracts for the purchase and sale of a business or the assets of a business; (2) agreements with executives, management personnel, and their professional staff; (3) contracts for the protection of trade secrets; or (4) contracts for recovery of expenses for educating and training an employee who has been employed for less than two years.

The Colorado statute applies not only to non-compete agreements, but also to agreements not to solicit customers or employees and agreements not to disclose trade secrets and other confidential information. Generally, most companies attempt to enforce their non-compete agreements under either the exception for executives or managers or the exception to protect trade secrets.

THE EXECUTIVE OR MANAGEMENT EXCEPTION

To qualify as an executive or manager under the non-competition statute, the employee must generally be in charge of the business and act in an unsupervised manner. If an employee has never supervised any other employees and has himself been supervised by other levels of management, a Colorado court will likely find that the agreement does not fit the exception.

Giving a non-management employee a managerial "sounding" title does not necessarily place the employee within the exception. A court will scrutinize the actual duties performed by the employee and may find that a job title is meaningless. For example, a sales professional who holds the job title of "account executive" or "account manager" may actually be supervised by...