Noncompete agreements are
disfavored in Colorado,
yet lots of employers do use them right now.
Governor polls is set to sign a bill
that could change those agreements
here to break it all down for us as
Whitney trailer, our legal expert.
Thanks for coming in.
Sure good to be here.
So this is very interesting.
First, let's talk about what
these agreements are about and
how they work for employees
right? So non competes are generally
agreements where the employee comes in
and says look if I leave I won't go to a
competitor within a certain amount of time.
And they also include generally non
solicitation and non disclosure,
which means you won't solicit current
other employees or you won't solicit
customers and things like that
and a lot of employers have them,
they even have them in the employment
handbook and saying that hey,
if you leave you agree to do this
and so a lot of people have them.
But Colorado generally disfavors them,
so they're only enforceable in
a few situations.
But what happens is lots of
employers have them and employees.
Don't know whether they're applicable or not,
but they'll generally kind
of comply with them.
So do you think a lot of employers know
that these aren't really enforceable yet?
They put him in there as kind
of like a deterrent? I guess
you know, I think so.
A lot of employers.
But the the issue is OK if
it's going to deter them,
maybe it's enforceable or not,
but we wouldn't know until somebody goes
to court to actually fight about it,
and that generally doesn't happen.
So it's it's generally a deterrent,
but sometimes the employee will go.
To a competitor and fight it actually
and say, hey I I disagree with this.
The enforceability of this and the
employer sometimes will back down
sometimes. Does it seem like it's
more enforceable if you manage
people versus not? Is that true?
Right? So that's one of the exceptions,
right? And so there's there's a
few exceptions under the current
law that says non competes are only
applicable for these certain jobs.
Well, the new law is going to
now essentially do away with.
Now compete agreements.
OK, and they're going to say, well,
now you can only have a non compete
with when there's a sale of a business.
Or if you're a highly compensated
employee which is over $101,000.
Or if you're doing it to
protect trade secrets.
So that's going to be the new life.
Governor Paula signs it and essentially
saying restrictive covenants.
These these are non competes will not
really be enforceable it it's taking
away a lot of power from the employer.
So it sounds like this is really going to be.
Really helpful for low and middle
income employees, right as you said,
under 100,000. Essentially,
that's correct, and even over 100,000.
There's still some exceptions to it,
but yes, under 100,000.
Essentially you can't have a non compete.
You will only then in that regard
be able to do it for trade secrets.
So if the company does something in
a very unique way, only they do it.
The Cope formula.
That's a trade secret, for example.
So you couldn't go and disclose that.
OK, that makes sense right?
But otherwise the non competes now.
The other interesting thing is the
employers are gonna have to be required
to give notice to current employees.
Hey, you're under this non compete
or prospective when they're hiring
somebody if they want to have a non
compete they actually have to tell them.
So if they that's going to be a big deal
because a lot of people actually have
them in place and didn't know that they
correct. What are employers
need to know about this?
If it does get signed into law,
well the employers.
I didn't know one thing that
there is a stiff penalty,
so if they violated it's
$5000 wow per employee so,
but the if they can show good faith
efforts to comply then that can be reduced.
So employers should make sure
they're documenting everything
that they're they're doing.
They should review their current policy.
Any kind of sort of 1 size fits all is
probably not going to be enforceable,
and because there's these penalties.
Employers really need to check
their policies and and talk with
their lawyers if they have them.
If he signs this, when would it take effect?
So it's supposed to be 90
days after the session ended,
so it would be sometime in early
August and everyone is saying
that he is expected to sign.
I don't know why he hasn't yet,
so this will be interesting
in the employment field.
Last question for you,
if you signed this agreement
before the law was in place,
would it stay into effect
right? So the law is gonna be.
Forward facing so, but no,
if you have a a current non compete
and if it's not compliant with this,
yes the employer's going
to have to change that.
So OK if you have one you know
in the log get signed then
you you need to look at your
current policies and make sure
it's not like these employees are
like grandfathered in with all of the
employees that they have now keeping
it OK that's correct. And and this
year has been really difficult for
employers especially in Colorado
because there's been a lot of
new laws that are requiring.
Revisions to handbooks and
just implementing new policies.
This is going to be a big one cause
a lot of employers have these sort of
blanket restrictive covenants right?
What they're called. Yeah,
a lot of changes,
and that's why we bring you in
and we always appreciate you.
Thank you for coming in on Friday.
Yes, happy Friday.