Location, location and location. That’s true with noncompete cases just as it is with real estate.
Employees typically want to stay in Colorado. They want a Colorado court to apply Colorado law to their noncompete. Employees want to avoid the stress and expense of hiring counsel in another state. Employees hope to have the court apply Colorado law which disfavors the enforcement of noncompete cases. And employees hope that Colorado judges will be sympathetic to a hard-working Colorado employee rather than a large, out of state company.
Many employers, on the other hand, seek to have any noncompete dispute heard in another state with less sympathetic rules about the enforcement of noncompetes. In addition, employers frequently have employees in many states. They want all noncompete cases involving their employees to be resolved in one place. That helps ensure a more uniform resolution of the cases.
To ensure that they control where any noncompete case is litigated, employers include forum selection clauses in the noncompete agreements. These clauses recite that a state other than Colorado will be the exclusive venue for any dispute arising out of the agreement. In response to these clauses, employees have filed declaratory judgment actions in Colorado in which they seek a ruling that their noncompete is not enforceable. By filing first, these employees seek to avoid the forum selection clause in their noncompete.
A recent Supreme Court decision may limit this tactic by employees. In a December 3, 2013 ruling, Atlantic Marine Construction Co.. v. United States District Court, the Supreme Court ruled that forum selection clauses should be enforced "in all but the most unusual cases." The choice by the party defying the forum selection clause should receive no weight. Arguments about the parties’ convenience should not be considered.
In light of this decision, employees need to be careful when they agree to a noncompete agreement that sets venue in a location outside of Colorado. Employers need to consider whether they should include a forum selection clause in their noncompetes.