Strong evidence suggests that litigation over non-competes, or covenants not to compete, has surged in the last several years. Most recently PC World in its June 20 issue lamented that the aggressive enforcement of non-competes had stifled tech start up development in states like Massachusetts. Non-compete Pacts Called Bad for Tech Innovation
In an effort to quantify the scope of the surge in litigation, Jay Sheperd at Gruntled Employees analyzed the number of published non-compete decision in state and federal courts nationwide and reported that published decions had increased 37% from 2004 to 2006. Are noncompetes the new Sarbanes-Oxley? Jay Sheperd speculates that one reason for the surge is the increase in the use of non-competes outside of the IT industry. Another reason may be the downturn in the economy as companies fight to maintain a competitive advantage.
Published decisions applying Colorado non-compete law have also surged in the last several years. Decisions have been published by the Colorado Court of Appeals in each of the last several years, as well as by the U.S. District Court in Colorado and the Tenth Circuit Court of Appeals. These decisions cover a wide range of industries, including the manufacture of solar inverters, window coverings franchises, dry cleaning franchises, financial counselors, investment bankers, environmental consultants and energy consultants. This recitation demonstrates how widespread the use of non-competes has become in Colorado. Non-competes in Colorado certainly are not limited to the IT industry.
These recent Colorado decisions do not show any pro-employee or pro-employer trend. Instead, consistent with the Colorado statute on non-competes, they demonstrate how each case depends on the unique facts of that case.
It is clearly true that a study fo publilshed decisions doesn’t tell you how many non-compete cases were actually filed. Most non-compete cases are resolved when the trial court rules on the employer’s motion for preliminary injunction, which seeks to enforce the non-compete. These trial court decisions are only published when they are issued by a federal district court. Nonetheless, there isn’t any reason to think that he number of filed cases hasn’t increased substantially in recent years.