If you have a non-compete agreement not specifically allowed by Colorado law, watch out. The state has now added a criminal penalty if you violate the statute on non-compete agreements. Colorado recognizes a strong public policy protecting the right of its citizens to earn a living. C.R.S. 8-2-113(2) forbids any covenant not to compete that restricts the right of any person to receive compensation for performance of skilled or unskilled labor for any employer. Recent legislation also provides for a misdemeanor for employers who have employees sign a non-compete agreement wrongfully. Effective March 1, 2022, violations of section 8-2-113 are a Class 2 Misdemeanor. As a result, this could lead to 120 days' imprisonment, a $750.00 fine per violation, or both.
Remember that there are four exceptions to this blanket prohibition: Purchase or sale of a business, protection of trade secrets, recovery of educational expenses, and covenants entered by executives or managers of a business.
If you want to know more, be sure to look at our white paper on the topic.
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