In 23 LTD. v. Herman, 2019 COA 113 (Colo. App. July 25, 2019), the Colorado Court of Appeals considered whether an employment agreement with an overly broad non-solicitation provision (which is a type of noncompete provision) could obligate a trial court to “blue pencil,” or modify, the provision to make it reasonable under Colorado law. The Court held that parties to a contract “cannot contractually obligate a court to blue pencil noncompete provisions that it determines are unreasonable” and that the trial court did not abuse its discretion in deciding not to modify the provision.
Case Overview: 23 LTD v. Herman
In this case, the employer, 23 LTD, d/b/a Bradsby Group (Bradsby), sued former employee Tracy Herman for breach of noncompete and nonsolicitation provisions in her employment agreement. The nonsolicitation provision stated, in pertinent part, that Herman would not contact or solicit “the business of any person, entity, applicant, client, employer or prospective employer” who Bradsby has contacted or solicited during the twelve (12) months prior to the [her] termination . . . .” within 30 miles of Bradsby’s principal place of business, which was in Denver.
A jury ruled that Herman had not breached the non-compete agreement, awarding Bradsby only nominal damages of one dollar on the non-solicitation claim. However, the district court later set aside this verdict, ruling that the non-solicitation provision was overly broad and therefore unenforceable under Colorado non-compete law.
Key Legal Arguments and Court Decision
Bradsby appealed, arguing that the employment agreement’s severability clause required the court to blue pencil the provision and modify it to a reasonable scope rather than invalidating it entirely. The Colorado Court of Appeals rejected this argument, holding that:
- Contracting parties cannot require courts to modify unenforceable non-compete agreements, even with a blue pencil provision.
- The severability clause in Bradsby’s contract did not obligate the court to modify the provision because the issue was not related to time or geographic scope but rather to the overbroad nature of the restrictions.
- Colorado courts have broad discretion to decline modification of non-compete provisions, especially when doing so would require significant changes to the original agreement.
The ruling reinforces Colorado’s strong public policy against overly broad restrictive covenants and emphasizes that employers must carefully draft non-compete and non-solicitation agreements to ensure they comply with Colorado employment law.
Implications for Employers and Employees
This case highlights the importance of narrowly tailoring non-compete and non-solicitation agreements to align with Colorado law. Employers should ensure that:
- Non-compete provisions are specific and reasonable in duration, geographic scope, and industry focus.
- Non-solicitation clauses do not impose excessive restrictions that could be considered overly broad.
- Employment agreements account for Colorado’s strong legal stance against restrictive covenants.
If an agreement is found to be overly broad, courts may choose not to enforce it at all, rather than rewriting it to be enforceable.
Baird Quinn Can Help With Non-Compete Compliance
Given Colorado’s strict stance on non-compete agreements, employers should seek legal guidance when drafting restrictive covenants. The employment attorneys at Baird Quinn provide expert assistance in ensuring compliance with Colorado non-compete laws and protecting business interests while remaining legally enforceable. Contact us today for tailored legal solutions.