U.S. - Colorado
New: 2022.07.25 Colorado Becomes the Latest State to Enact Income-Based Threshold for Noncompetition and Customer Nonsolicitation Covenants (Duane Morris LLP).
Continued Employment -- provides sufficient consideration for entry into a non-compete. So held in Lucht’s Concrete Pumping, Inc. v. Horner, Colorado Sup. Ct. (2011.May.31), providing that --
- "When an employer forbears from terminating an existing at-will employee, the employer is forbearing from exercising a legal right. Continued employment of an at-will employee may therefore constitute adequate consideration for a noncompetition agreement.
ERISA Preemption - Not Applicable to Forfeiture-for-Competition Case. Colorado law applies, not ERISA, with respect to claims under an individual salary continuation agreement, in part due to the employer's failure to establish that 27 similar agreements constituted an ERISA plan. Hoffner v. Bank of Choice (D.Co. 6/2011), with the following nonitalicized text being direct quotations:
- Nature of Contract Right: [The salary continuation agreement] specifically provides a deferred compensation benefit to Plaintiff – in the amount of $50,000 per year for ten years – upon reaching age 65. However, if Plaintiff voluntarily terminates his employment prior to reaching age 65, as occurred here, the Agreement provides that the deferred compensation benefit would terminate. Instead, Plaintiff would be provided “severance compensation,” which would equal “the balance in the accrued liability retirement account at the date of termination inone (1) lump sum” at age 65.
- Holding: Under these circumstances, the Bank has not demonstrated that the Agreement at issue is a “plan” governed by ERISA. In so deciding, I note that the Bank has not shown that a reasonable person could ascertain the intended benefit of the Agreement. While the source of financing is the “liability reserve account,” that account is not further defined in the materials provided. More importantly, the Agreement does not benefit a “class of beneficiaries,” but rather constitutes an employment benefit to a single employee. I am not persuaded by the Bank’s unsupported claim that other employees are likewise provided with this benefit – via “similar” agreements – and thus it is a “plan” with an ascertainable class of beneficiaries.
- In addition, I agree with Plaintiff that the Agreement does not constitute a “plan” in that it does not create a benefit which requires an ongoing administrative program. See Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987)(ruling that a lump-sum severance payment to employees, as required by state statute, was not preempted by ERISA plan in that employers were not required to establish “an ongoing administrative program” that might be subject to conflicting state regulations or to administer funds that might be subject to abuse or misappropriation).