Can an employer fire an existing employee who refuses to sign a non-compete?
In recent years, employees in several states have attempted to assert claims for wrongful discharge when their employment was terminated after they refused to sign non-compete agreements. Typically, these employees have argued that their termination for refusing to sign the non-compete constituted a wrongful discharge in violation of public policy. The Supreme Courts in New Jersey, Oregon, Vermont and Wisconsin have rejected these claims and affirmed the right of employers to terminate employees for refusing to sign a non-compete. These courts generally have reasoned that non-competes do not sufficiently implicate public policy to alter the fundamental nature of an at-will employment relationship. California, on the other hand, has recognized that a wrongful discharge claim may be asserted.
This split in authority certainly suggests that the viability of any claim for wrongful discharge will depend on a state's public policy toward non-competes. California's strong policy against the enforcement of non-competes played a large role in the decision to recognize a claim for wrongful discharge for the termination of employment based on the refusal to sign a non-compete.
Colorado's state appellate courts have not squarely faced this question. In 1990, a federal district court, in Colorado, however, concluded that a claim for relief for wrongful discharge did not exist for an employee who was terminated after refusing to sign a non-compete, despite Colorado's statute voiding any non-compete which does not fall within one of the statutory exceptions. The court noted that it was not the role of a federal court to effect a dramatic shift in a state's common law.
Since that decision, Colorado has continued to develop the claim for wrongful discharge in violation of public policy. That claim requires the employee generally to show that the employer directed the employee to perform an illegal act or that the employer prohibited the employee from performing a public duty. This showing would need to be made by any employee seeking to establish a claim for wrongful termination based on the refusal to sign a non-compete.
Even if an employer may terminated an employee for refusing to sign a non-compete, that does not mean that any non-compete signed by the employee is enforceable. Any non-compete would need to be considered in light of Colorado's statute generally voiding non-competes. In addition, these decisions do not resolve whether a court would decline to enforce a non-compete signed by an existing employee for lack of consideration.
