In the last several years, several states have adopted statutes governing the enforcement of non-competes, including Oregon, Connecticut and Idaho. In other states, legislation has been proposed but not adopted. None of the statutes in other states are identical to Colorado’s although similarities exist.
In the midst of these changes in other states, it is worthwhile to reconsider the history of Colorado’s non-compete statute.
Colorado’s statute, Colo.Rev.Stat. 8-2-113(2), was adopted in 1973. Only one change has been made since the statute was adopted: subsection (3) was adopted in 1982. That subsection generally voids physician non-competes. To our knowledge, there has been little if any discussion of changes to the Colorado statute.
Prior to the adoption of the statute, Colorado followed the common law under which a covenant not to compete was valid and enforceable if the covenant was reasonable in duration and geographic scope. That rule was first adopted in a 1909 decision in which the Colorado Supreme Court considered various English and American cases and ruled that "Reasonable restrictive covenants are consistent with public convenience, individual interest, and the general welfare".
In these pre-statute cases, an employee had the burden to show that any restriction was unreasonable. That burden was difficult to meet. Throughout these decisions runs a theme of moral disapproval of anyone who would seek to breach his contractual obligation. The Colorado Supreme Court noted on more than one occasion that the employee’s conduct was "wrong" because he was "deliberately doing what he plainly agreed not to do". Non-competes were sustained for terms up to five years and with distances of 100 miles.
After the Colorado statute was adopted, courts recognized that the burden had been flipped to the employer who now had the burden of showing that any non-compete fell within one of the exceptions to the general rule voiding non-competes in Colorado. If the non-compete fell within an exception, the employee still could challenge the restrictions on duration and geographic area as unreasonable.
Colorado’s non-compete statute is an important part of any analysis of whether a non-compete is enforceable under Colorado law. It is important to recognize that this statute is different than the statutes adopted in other states. It is also important to recognize that the statute does not answer all the questions raised in non-compete cases. Those answers may come from the common law in Colorado or from the law in other states.