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The state of Colorado does not generally approve of non-compete agreements. See the actually laws at Rev. Stat. § 8-2-113(2). Many times non-compete agreements cannot even be enforced in Colorado courts. However, this statute also creates four exceptions to the general rule that recognize specific situations when non-compete and non-solicit agreements may be enforced by a court.
First, non-compete and non-solicit agreements may be enforceable if they have to do with the buying or selling of a business. Second, they may be enforceable if they are designed to protect the employer's trade secrets. Third, if you have an employee who is being trained on the job and has worked for you for less than two years. Fourth, and finally, a non-compete agreement might be enforceable if they pertain to a high-ranking executive or CEO, etc.
Just claiming one of the above exceptions will not necessarily make the non-compete agreement okay with the Colorado courts, though. The court will look at the facts and make its own determination on a case-by-case basis. You also have to be reasonable in your geographical area you write into the agreement for it to "pass" the court scrutiny.
As to the software engineer, the "trade secret" exception might be the one to look at. If he invents or works up some software while employed by the company, he could not go selling it to someone else. You probably could not be successful at getting the actual person to not work somewhere else.
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