Non-compete rules vary by state: Don't Assume that Colorado will follow decisions from other states
We are often contacted by potential clients who have already researched the non-compete or other issue in dispute. These potential clients already understand, for example, that Colorado has adopted a statute that sets forth when a non-compete may be enforced. In addition, they have used the internet to look at recent decisions from Colorado and other states.
Sometimes, however, a little information can be a dangerous thing. A recent post in another blog is a good example. In that blog post, the author reported that, at least in South Carolina, a non-compete could not be enforced when the only consideration provided for the execution of the non-compete was continuing at-will employment. That is, that a non-compete, signed by an employee after he had started his job, was not enforceable unless the employer provided the employee with some benefit ( e.g. a bonus, a promotion) other than continuing employment.
That may be the law in South Carolina. We don't practice there and we wouldn't profess to know. But this issue is not so easily resolved in Colorado.
In Colorado, a non-compete, like any other contractual obligation, must be supported by consideration. The employer, in other words, must provide the employee with some benefit. It isn't as clear, however, whether an employee's continuing employment is sufficient to support the non-compete obligation (that is, an explicit or implicit threat that the employee would be terminated unless he signs the non-compete). Colorado courts have held, for example, that continuing employment can be sufficient consideration to bind an employer to a promise in a employee handbook. Those cases imply that continuing employment is sufficient to support a non-compete obligation.
As a practical matter, cautious employers will combine any request to sign a non-compete with a bonus or some other benefit. That added benefit will assist the employer in showing that consideration existed for the non-compete.
More importantly, however, an employee should not rely on a blog post about the law in another state in making a decision about whether his non-compete in Colorado is enforceable. The law on non-competes varies widely across the United States. Do not assume that Colorado will follow the approach adopted in other states.
