In 2018, the rules changed for physician noncompetes in Colorado.

Since 1982, physician noncompetes have been governed by a rule unique to physicians. Colorado’s noncompete statute voids “any covenant not to compete provision of an employment, partnership, or corporate agreement between physicians” that restricts the right of a physician to practice medicine. As a result of this statute, courts cannot enjoin physicians from practicing medicine – regardless of whether the physician agreed to the restriction. Colorado’s noncompete statue also provides, however, that other provisions in a physician agreement are enforceable, including provisions that require the payment of damages in an amount “reasonably related to the injury suffered”.

Continue Reading Physicians, Non-Competes and Liquidated Damages in Colorado

A recent decision in Denver District Court, Business Network Consulting v. Perkins, demonstrates the risks taken by aggressive employers when they seek to impose restrictions on a former employee that aren’t set forth in any written agreement.

BNC, a computer consulting company, sprung into action when it learned that one of its customers had offered a job to its former employee, Perkins. BNC contacted its customer and threatened litigation even though the customer had never signed BNC’s form contract that barred customers from hiring BNC’s employees for a limited time after an employee left BNC. Reluctant to get involved in litigation, the customer conferred with Perkins about BNC’s threats and Perkins elected not to go to work for the customer. The customer then reached a settlement with BNC under which the customer disclosed its communications with the employee and agreed not to employ Perkins for several years.

Continue Reading Leveling the playing field; tortious interference claims against a former employer

Once the decision is made to quit and join a competitor, employees sometimes will delete information on the company laptop issued to them.  Various explanations are offered by employees for the deletions. Employees will claim that the deletions were personal photos or information. Or, that the deletions were done only after hard copies of the documents were placed in the company files. Or, that there wasn’t any information on the computer when the computer was issued and that they were only returning the computer in the same condition as when they received it. Employers, on the other hand, immediately become concerned that the employee deleted information in an effort to gain a competitive advantage. Or, that the information was deleted by the employee in an effort to punish the employer. If the employer concludes that valuable information was deleted, it may retain a computer forensic expert to recreate the information. On a more subtle level, employers often try use the deletions to diminish sympathy for the employee and show that the employee was a “bad” person. We’ve been involved in several civil cases where these kind of allegations have been made, and the allegations have played a major role in how the cases were resolved.

A recent Colorado Supreme Court case, People v. Stotz, demonstrates how an employee can be exposed to criminal  liability if he elects to delete information from his employer’s computer system. In Stotz, the defendants were all former employees of an electrical testing company who had resigned and accepted jobs with a competitor. Once the employees left, the electrical testing company discovered that information was missing from laptops used by the former employees. A computer forensics expert was retained and determined that thousands of documents had been copied and then deleted from the laptops.

Continue Reading Computer crime in Colorado; the risk of criminal prosecution for deleting documents

Photo Dictionary and glassesNoncompetes are contracts, and any analysis of a noncompete starts with the language in the noncompete. Once a dispute arises, companies often learn that the language in their noncompete agreements fails to impose the obligations that they had intended. If a company then tries to enforce the agreement that it intended, rather than the agreement that was drafted and signed, courts are unsympathetic.

A recent federal court case in Colorado decided by Magistrate Wang, Continental Credit Corporation v. Garcia, demonstrates the risks to a company when it fails to use exact language to define the obligation owed by an employee under a noncompete.

Continental Credit, National Credit Care and Home Loans Assist Corporation were related companies that shared the same owners, officers, management and employees. All three companies were located in the same office on West 121st  Avenue in Westminster, Colorado and provided credit repair services. The three companies operated separately to take advantage of different marketing and pricing opportunities. Any new employee was required to sign a noncompete agreement with National Credit Care. After the employee was hired, he or she was assigned to one of the three companies. Sometimes, employees were transferred from one company to another depending on the work available for the companies.

Mr. Garcia signed a noncompete agreement when he was hired in October 2014 and that agreement, like the other employee agreements, was with National Credit Care. As soon as Mr. Garcia was hired however, he began working for Continental Credit. Mr. Garcia continued to work for Continental Credit until he quit and joined a competitive company.

Continue Reading Employers take note; courts will favor employees when they interpret noncompetes

We are Colorado lawyers and typically don’t appear in cases outside of Colorado. Nonetheless, we monitor developments in noncompete law in other states, particularly in the states near Colorado. Those developments often expose unresolved issues in Colorado, or highlight choices made in Colorado’s noncompete statute and caselaw.

In 2015, health care practitioners in New Mexico caught a break when New Mexico adopted a new statute that limits the enforcement of noncompete agreements against them. In general, the New Mexico law bars the enforcement of noncompetes against health care practitioners, but allows the recovery of relocation expenses and signing bonuses, authorizes the enforcement of non-solicitation provisions and allows the recovery of reasonable liquidated damages. About twenty five years ago, Colorado adopted legislation that bars the enforcement of noncompetes against physicians. The impetus for the legislation in the two states appears to have been similar. Both states sought to encourage physicians to remain in the state and to continue to practice medicine, particularly in rural areas.

Continue Reading New Mexico adopts new noncompete law for health care practitioners

In Colorado, employers often claim that noncompetes signed by salemen are enforceable because the company has customer lists and other proprietary information which are trade secrets. Employers resort to the “trade secret” exception in Colorado’s noncompete statute, because many salesman don’t have management responsibilities and the statutory exception for executive and management personnel can’t be invoked. It is true that the trade secret exception can be used by employers against salesmen or non-managers. And Colorado courts repeatedly have held that sales histories, buying patterns and customer preferences can, under the right circumstances, be trade secrets even if the names and addresses of the company’s customers are publicly available.

Continue Reading Customer lists aren’t always trade secrets

Ready, fire, aim. That’s how one commentator describes the mistake often made by many companies when they commence a trade secret lawsuit.

What he means is that companies rush to file a lawsuit for trade secret misappropriation when an employee quits and takes a prominent position with a competitor. Immediate action seems necessary to protect the company’s trade secrets and to prevent the former employee from using and exploiting the trade secrets. In their rush to file the lawsuit, however, companies often fail to analyze whether they truly have trade secrets and, if so, what their trade secrets are. This failure results in the company claiming that information is a “trade secret” when it really isn’t — typically because the information isn’t secret, either because it is known to the competition or because it is readily ascertainable by the competition. Because the company can’t identify a trade secret, the lawsuit fails, often after a signficant expense for fees and costs to prosecute the lawsuit. In effect, the company fires before it has taken aim.

Continue Reading First things first; the need to identify the trade secret

A recent decision from the Bankruptcy Court in Denver examines (and struggles with) some of the many issues that arise when a person subject to a noncompete files for bankruptcy.

In In re Hruby, 2014 WL 2071997, Debtor had been employed by Midwest Motors, but quit and apparently took another job with a competitor and made sales to customers that he serviced when he was employed with Midwest. There was evidence that the debtor had accessed Midwest’s computer files containing confidential customer information and that debtor had utilized Midwest’s confidential customer information to solicit Midwest’s customers. The debtor had signed a noncompete agreement when he was employed by Midwest. The noncompete included a noncompete provision (two years from the time any violation ceased) and a non-solicit provision that barred solicitation or service of any customers  contacted, serviced or supervised by the employee. The noncompete agreement called for the application of Ohio law and stated that any enforcement action “must” be filed in Ohio.

Continue Reading Bankruptcy and noncompetes in Colorado

Recent efforts to bar noncompetes in Massachusetts have triggered a series of general interest articles about noncompetes.

Earlier this month, the New York Times ran a story about how “Noncompete Clauses Increasingly Pop Up in Array of Jobs” ( That article suggested that more employees were being asked to sign noncompetes and that noncompetes were being used in unexpected fields. The article began, for example, with an account of a camp counselor who was asked to sign a noncompete and included a story about a hairstylist who was unemployed for a year because he lost a court battle with his former employer over a noncompete.

Continue Reading More attention focused on noncompetes

Two recent FTC actions have confirmed once again that companies should not enter agreements to refrain from hiring each other’s employees.

In 1992, Tecnica and Volkl began collaborating in the marketing and distribution of complementary ski equipment: Volkl skis and Tecnica ski boots. The companies initially were not competitive. Tecnica at that time didn’t sell skis and Volkl didn’t sell ski boots. Both companies marketed their products by securing endorsements from ski athletes, like World Cup and Olympics skiers. These endorsement agreements typically are short and subject to renewal. The ski athlete authorizes the company to use his name and likeness in promotions and advertisements, agrees to use and promote the company’s equpment on an exclusive basis and agrees to display the equipment when he receives media exposure (e.g. on on the medal stand). In exchange, the company pays the ski athlete, supports him at competitions, and gives him free or discounted equipment. Ski companies compete with one another to secure the endorsements of Olympians or World Cup skiers. The skiers derive much of their income from endorsements.

In In re Tecnica and In re Marker Volkl, the Federal Trade Commission alleged that in 2004 Tecnica and Volkl agreed not to compete with one another to to secure the endorsement of athletes. Several years later, the two companies supposedly reaffirmed that the companies would not compete withone another for the endorsement deals. They also supposedly agreed not to compete for the services of each other’s employees.  The FTC alleged that these agreements violated Section  5 of the Federal Trade Commission Act.

Both companies have now entered into Consent Orders with the FTC. Under the Consent Orders, the companies will be barred from entering into any agreement under which they wouild forbear from soliciting, cold calling or recruiting any ski athlete for endorsements. Similarly, they would be barred from entering any agreement under which they would refrain from soliciting each other’s employees, or any other company’s employees.

These consent orders should not come as a surprise. They follow the highly publicized enforcement actions in Silicon Valley that were pursued by the Department of Justice. In all of these cases, the allegation has been that companies seek to suppress the wages paid to employees by agreeing not to solicit or hire each other’s employees.

We can only speculate whethere these FTC enforcement actions will prompt civil suits by the affected employees or “endorsers”. After the DOJ pursued its enforcement action in Silicon Valley case, civil suits were promptly filed, which resulted in an agreement to pay the affected class of affected employees over $300 million. That settlement did not come, however, without a fight. According to one commentator, the Silicon Valley settlement was prefaced by extensive fact discovery, including 107 depositions, the review of millions of pages of documents and analysis of over 50 gigabytes of data consisting of approximately 80,000 different files. The litigation had two rounds of class certification briefing and argument including the exchange of eight expert reports by four economists. It’s hard to say whether the FTC settlements will prompt that kind of effort.