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Bryan E. Kuhn
Counselor at Law, P.C.
Business & Employment Law Attorney

Could non-compete agreements be banned in Colorado?

Business owners in Colorado are generally very serious about protecting their companies. They want to make sure they do whatever it takes to ensure that they stay competitive in the market, while also ensuring their company is a good place for employees to work. Maintaining this balance can be a delicate process, and some companies who value one of these goals significantly more than the other can end up facing legal consequences. This can be especially true when it comes to contract disputes

Many employers choose to protect their company’s trade secrets and other confidential information by requiring employees to sign non-compete agreements. On one hand, this ensures that certain information is kept private while providing an incentive for workers to stay with one company rather than moving to a competing organization. However, recent reports suggest that non-compete agreements may actually be hurting the economy.

Non-compete agreements are designed to prohibit employees from working in a similar position at a rival company, should they choose to leave their current job. With a non-compete agreement in place, former employees would face legal penalties for sharing client lists and other business secrets with another company. 

But some states are considering banning these agreements. Some argue that non-compete agreements are making it very difficult for laid-off workers to find new jobs in an area until an agreement expires. This has caused some strain in some cities that are already struggling with high unemployment rates.

In California, for example, non-compete agreements are banned. Some sources suggest that this is a primary factor in the success of many high-tech businesses because workers are not confined by the terms of these restrictive agreements. In fact, there is evidence to suggest that workers in states that strictly enforce these contracts are likely to move to states with fewer restrictions on employment.

Whether or not Colorado will follow in the steps of California and other states considering the move is unknown at this point. If it is determined that non-compete agreements is negatively affecting employment rates in the state, it is certainly something that may be considered. What do you think? Should there be limits or a ban on non-compete agreements?

Source: Thomson Reuters News & Insight, “Analysis: Unleashing job hoppers could give economy a bounce,” Reynolds Holding, April 25, 2013

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