Make a Colorado Non-Compete Agreement

Applicable State Laws - § 8-2-113

Although Colorado allows and enforces non-compete agreements, they are generally disfavored among the courts if they are not properly drafted. The court upholds these agreements when used appropriately, such as when a business must protect their trade secrets, the sale of a business, or when a restraint must be put on key personnel, such as management personnel.

Colorado law dictates that physicians and surgeons may not be required to sign a non-compete agreement. In certain instances when a former employee breaches a non-compete agreement, the business may be entitled to the recovery of the expense of educating the employee.

Protect your Colorado business by also using a Colorado non-disclosure agreement form. Download a Colorado non-disclosure agreement form now!

How to Write a Colorado Non-Compete Agreement

To write a Colorado non-compete agreement, you should first review the requisite Colorado statutes. To help ensure enforceability, you should seek the legal advice of a licensed law firm skilled in handling covenants not to compete. To write your own Colorado non-compete agreement, include the following clauses:

• Purpose. This clause explains the purpose of the non-compete agreement: to protect the confidential information of the business. It also identifies the parties and provides the effective date. It refers to confidential information as propriety information. An example of proprietary information may include current customers' information.
• Non-compete. This clause may include time restriction, geographic restriction, restricted business practices, clients or customers, general competitors, restricted business activities, specific competitors, specific activities, and restrict employee solicitation. Keep in mind that Colorado courts disfavor overly broad non-compete agreements. Also keep in mind that Colorado statutes and the courts will not enforce a non-compete that prohibits an individual from getting a job, regardless of whether or not they are unskilled labor.
• Time period. This clause explains when the time period begins: either when the new employee or independent contractor begins working for your business or when their relationship is terminated.
• Purchase option. This clause states whether your business will allow the employee or contractor to pay a specified amount to essentially buy out the contract. If so, the amount they must pay will be listed in this clause.
• Jurisdiction. This clause is used to set Colorado Revised Statutes as the laws that will govern the non-compete agreement.
• Confidential information. This clause states that the term "confidential information" used throughout the agreement refers to any and all technical and non-technical information provided by your business that includes, and is not limited to, products, inventions, plans, methods, processes, developmental or experimental products, intellectual property, software, databases, customer lists, vendor or supplier lists, marketing methods, reports, business plans, financial information, or other matter pertaining to your business or any of your clients, consultants, or licensees that may be disclosed to the other party under the terms of the agreement.
• Permitted disclosure. This clause explains what happens to make confidential information no longer confidential. Generally, this occurs when information becomes public through no fault of the other party, when the other party discovers the information on their own without the breach of a third-party, or when information is released to the public after your business provides written consent.
• Confidentiality. This clause states that the other party acknowledges the information to which they have access is confidential and that they agree they will not directly or indirectly disclose or communicate it to another without your business’s written consent. They also agree they may not use the information for any purpose except to further the business without first receiving written consent.
• Consultants and employees bound. This clause states that the agreement binds both consultants and employees and that they are on a need-to-know basis regarding the information. It also states that they must keep confidential information in the strictest of confidence.
• Return of materials. This clause states that when the non-compete is terminated or at the request of your business, the other party must return all documents and tangible material that represents the business’s confidential information as well as any copies that exist. The clause also states that your business will notify them in the event of any discovery of any loss or unauthorized disclosure of confidential information.
• Remedies. This clause explains the remedies your business is entitled to pursue if the other party breaches the non-compete. Examples include the recovery of court costs and reasonable attorney fees, the award by a Colorado court of a temporary restraining order or preliminary injunction against unauthorized use of confidential information, etc., as well as all other remedies available according to Colorado Revised Statutes as well as equity-based remedies.
• Choice of law. This clause states that Colorado law governs the non-compete agreement.
• Entire agreement. This is the final clause of the agreement. It states that the entire agreement may only be amended in writing and that both parties must sign it if it is amended. Additionally, both parties must sign and print the non-compete agreement for it to be executed. The signatures should be dated.

Each party should receive a copy of the executed non-compete agreement for their records.