colorado noncompetition law · defend trade secrets act access to federal courts employee...

Labor & Employment Seminar 5/18/2016

© 2016 Husch Blackwell LLP. All Rights Reserved. 1

Colorado Noncompetition LawThe Enforceability And Advisability Of Noncompetition, Nonsolicitation And Confidentiality Agreements

Chris Ottele and Emma Savory

TopicsOverview

Defense of Trade Secrets Act

Colorado’s Four Exceptions

Reasonableness: Duration and ScopeConsideration

Nonsolicits and Confidentiality

Drafting

Multistate Issues



What is a Noncompetition Agreement

Balance of Concerns

Legitimate Business Interests

Employee’s Right to Make

a Living



Defend Trade Secrets Act

Access to Federal Courts

Employee Protections

Ex Parte Order

Mandatory Language

States Still Have a Say

First Exception: Sale of Business

Greater Deference

Must Still Be Reasonable



Second Exception: Trade Secrets

Is it confidential?

Did the employer guard the

trade secret?

Does it confer an

advantage?

Third Exception: Education and Training



Fourth Exception: Executive and Management

Executive and management personnel and officers

Employees who constitute professional staff to executive and management personnel

Physicians

Noncompetes Prohibited

Liquidated Damages

Unless reasonably related to the injury suffered



Duration & Scope = Must Be Reasonable

Duration

What is reasonable?

• Necessary to safeguard the plaintiff’s business. • 6 months to perpetuity

Colorado federal district court once described a noncompete with a maximum term of __ months as “well within the terms approved by Colorado courts.”

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Scope

Location the employer

actually does business.

Consideration

Noncompetition covenants require consideration.

Forbearance of terminating an at-will employee at any time constitutes adequate consideration.



Nonsolicitation Agreements

Coworkers: Limited to prohibiting active solicitation

Customers: Analyzed like a noncompetition agreement • Must fall into one of the exceptions:

• Purchase of a business • Protect trade secrets• Recover for education and training

expenses• Executive or management personnel

Confidentiality Agreements

Enforceable to the extent the information

is acquired during employment.

General information is not confidential.



Drafting

Interstate Issues



Life Cycle of an Employment ClaimBarbara Grandjean and Mary Stuart



Litigation

Hiring

Performance Management

Issues

Discharge

Claim

HIRING



The Basics: Hire Well

Job description

Clear expectations

Background complete

When in doubt—DON’T

Where we see problems

AccommodationsPotential

modifications

Background Learn after start

Consistency “I know, but”

Requisite qualifications

Mean what say

Expectations Job is full

time, schedule fixed

Pay or benefits Undefined



Performance

Hold Employee Accountable

• Does not need to be formalDeal with and

document

• Honest and specificAnnual reviews

• “Meets expectations” does not justify firingJuries believe what is in writing



It’s a two-way street

Policies

Apply non-discriminatorily

Notice

Consider PIP

Fairness

Never promise, always practice


Due process

No chance to tell his

side

Favoritism No consistency

Complaints No response

Employee “surprise”

No warning

ADA No

interactive process

FMLA No “empathy”



Discharge

Only one chance to do it right

Complete investigation first • Collect documents• Review computer files

Give due process• No matter how clear cut• Have two people in meeting



Discharge meeting• Manager plus one• Prepare ahead, stick to script

Professional and direct

• Packing belongings• IT and property accessAfter the meeting

• Co-workers• References

Communications to others


ConsistencyOthers did the same

thing

“Humiliation”Is security

escort necessary

Retaliation

Difficulty finding future

employment

Contradictions Engaging in arguments

Lack of honesty

Job restructuring

Adding reasons

Sounds like pretext



The Claim

What comes nextDemand

letter

Demands explanation

Demands money

Charge (300 days)

EEOC

CCRD or other

Agency

Notify

Attorney or risk manger

Insurance carrier

Preservation (Legal hold)

Employee’s computer

All relevant files and records



Responding to DemandInvestigate claims

Respond appropriately

Wage Act time limits

Decide if want to negotiate


Disparaging employee

Inflames passion

Challenging attorney

“Bring it on”

Lack of empathy

Acknowledge job loss is

difficult

Don’t consider what said

Would two months of COBRA

resolve issue

Failure to respond

Didn’t take seriously

Incorrect response

Too much and not enough



Responding to EEOC or CCRD

Mediation

Consider pros and cons

Is attorney involved

Do you know employee

Assessment by a third

party

Responding to EEOC or CCRDPosition

statement

Take very seriously

Recent EEOC guidance

Tell a good story

Must be accurate

Memories fade, employees

leave

Get statements

Collect all documents

Don’t screen for “relevance”

Include attorney on all

communications

Don’t create new evidence




Conclusory statements

only

Let the facts lead to the conclusion

Unnecessary statements

Often lead to problems

Failure to provide

requested info

OK to limit but don’t ignore

Blanket denial

Of course you didn’t

discriminate

“Employment at will”

Forget about it

Inflammatory words

Just the facts

Timing of Administrative Process

EEOC has no time limit• Can be years

CCRD is supposed to resolve in 270 days• May ask for extension



Results of EEOC Process• Will seek conciliation

• If fails, EEOC lawsuit (no time limit) or right to sue (90 days)

Probable cause

• CP must file lawsuit in 90 daysRight to sue at CP’s

request

• CP must file lawsuit in 90 daysNo basis and right to

sue

Results of CCRD Process• Usually writes decision and issues right to sue

• CP can appeal or file lawsuit in 90 daysFinds no probable

cause

• Will seek conciliation• Could hold hearing or issue right to sue

Finds probable cause

• CP must file lawsuit within 90 daysIssues right to sue

at CP’s request



The Lawsuit

Now whatFederal court or state court

Formal discovery process

Motions

Time to trial, 1-3 years

• Written discovery• Depositions



What to do

Designate a point person

Update legal hold

Do not discuss without counsel present

Update insurer

Discovery processIntensive and time consuming

Much greater burden on employer than employee

Electronically stored information (ESI)

Protocols in place before litigation

Discovery violations can overtake the merits



Depositions

Who Decision makers HR Rule

30(b)(6)

What does it mean

Usually a day

Must be prepared

Resolution before trial

• Offer of judgment (Rule 68)• Negotiations• Mediation

Settlement

• Facts don’t support a legal claim• Don’t count on it

Summary judgment



The Trial

Jurors Employees themselves and their situations shape their views

Employers negligent if don’t document problems

Justice more important than letter of the law

Corporations will lie to win

More likely to believe employee than supervisor

Often find against corporation rather than for employee

The Trial

Winning Case

Good story

Decisions made by individuals, not a corporation

Manager went above and beyond to help employee

Employee did not take advantage of Manager’s efforts

Decision necessary to protect customers, patients, co-workers

Decision-maker seen as honest, credible and likeable



Regardless of the Result

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