Within the Tenth Circuit, states vary in their enforcement of restrictive covenants. Wyoming, Kansas, and New Mexico govern the use of restrictive covenants through common law while Utah, Colorado, and Oklahoma govern through statute. Oklahoma is unique in that it prohibits restrictive covenants through statute. In the other five states, despite the variations in governing authority, many of the factors used are similar given the widely accepted “reasonableness” standard many jurisdictions have adopted as a metric for adjudicating the propriety of such agreements.
| State | Law governing restrictive covenants | Restrictive covenants in employment agreements are prohibited: |
| Oklahoma | Okla. Stat. Ann. tit. 15, § 219A | Generally, restrictive covenants in employment agreements are not enforceable with the exception of direct solicitation of a former employer’s customers.“A. A person who makes an agreement with an employer, whether in writing or verbally, not to compete with the employer after the employment relationship has been terminated, shall be permitted to engage in the same business as that conducted by the former employer or in a similar business as that conducted by the former employer as long as the former employee does not directly solicit the sale of goods, services or a combination of goods and services from the established customers of the former employer.B. Any provision in a contract between an employer and an employee in conflict with the provisions of this section shall be void and unenforceable.” |
| State | Law governing restrictive covenants | Restrictive covenants in employment agreements may be enforced if: |
| Wyoming | Common LawSee Hassler v. Circle C Res., 505 P.3d 169 (Wyo. 2022) | It is in writing;part of a contract of employment;based on reasonable consideration;reasonable in duration and geographical limitations;and not against public policy. |
| Kansas | Common LawWichita Clinic, P.A. v. Louis, 185 P.3d 946 (Kan. App. 2008) | It protects a legitimate business interest of the employer;does not create an undue burden on the employee;is not injurious to the public welfare;contains reasonable time and territorial limitations;supported by valid consideration;and ancillary to the contract. |
| New Mexico | Common LawSee Bowen v. Carlsbad Ins. & Real Est., Inc., 724 P.2d 223 (N.M. 1986) | It is within reasonable limits of time and space.It is ancillary to a sale of a business. |
| Utah | Utah Code Ann. §§ 34-51-201; 34-51-202 | It is for a period of, at most, one year after the individual’s termination date. *applies to agreements entered into on or after May 10, 2016It is part of a reasonable severance agreement mutually and freely agreed upon in good faith at or after the time of termination.It is related to or arising out of the sale of a business, if the individual subject to the restrictive covenant receives value related to the sale of the business. |
| Colorado | Colo. Rev. Stat. Ann. § 8-2-113 | It is a contract for the purchase and sale of a business or the assets of a business.It is a contract for the protection of trade secrets.It is a contractual provision providing for recovery of the expense of educating and training an employee who has served an employer for a period of less than two years.It pertains to executive and management personnel and officers and employees who constitute professional staff to executive and management personnel.*A violation of this section constitutes a class 2 misdemeanor. |
For further information, please contact:
Katie Lee, Crowell & Moring
katlee@crowell.com
