Colorado’s New Non-Compete Law: Employer’s Guide

Understanding Colorado’s New Law on Non-Compete Agreements

Colorado implemented CRS 8-2-113, effective since August 10, 2022, rendering most non-compete agreements unenforceable for residents.

Scope and Exceptions

The law covers employees and independent contractors, invalidating post-employment non-compete and customer non-solicitation restrictions, except in specific cases like business sales or highly compensated employees.

Notice Requirements and Penalties

Strict notice rules apply to permitted exceptions, with penalties for noncompliance including fines, damages, and potential criminal charges. The notice requirements include sending a separate document with clear and conspicuous terms in the language in which the worker and employer communicate about the worker’s performance. This must be signed by the worker, and a copy of the agreement containing the applicable covenant must be provided to the worker.

Every Colorado businesses should understand that noncompliance could result in significant financial penalties, including payment of actual damages, a penalty of $5,000 per worker or prospective worker harmed by the conduct, court costs, and attorney’s fees. Violations are also considered to be Class 2 Misdemeanors and can be enforced at the discretion of the District Attorney.

Compliance Recommendations

Businesses should limit restrictions on competitive employment and follow notice requirements. Existing non-compliant agreements require updates for Colorado-based workers hired after August 10, 2022.

Legal Guidance

To navigate compliance, businesses should consult legal counsel to ensure adherence and enforceability of agreements under the new law. Taking proactive measures will mitigate risks and maintain enforceable provisions.