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Several states have passed legislation limiting the use of non-compete agreements. The goal? To limit an employer’s ability to restrict an employee’s ability to move to a competitor.  Colorado’s law is no exception.

Effective March 2, 2022, Colorado employers must ensure their current and future non-compete agreements do not violate state law. Agreements found to violate C.R.S. 8-2-113 are a Class 2 Misdemeanor that could result in 120 days’ imprisonment, a $750.00 fine, or both.

This legislation does not apply to:

• Any contract for the purchase and sale of a business or the assets of a business

• Any contract for the protection of trade secrets

• Any 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

• Executive and management personnel and officers and employees who constitute professional staff to executive and management personnel.

All these contracts are viewed through a lens of reasonableness. Colorado courts analyze the agreement for reasonable duration, geographic limitation, and restrictions on activity. This is a factual determination, heavily influenced by the type of industry in which the employer is engaged.

A favorite tool of drafters of these agreements is to include a “blue pencil” provision, allowing the Court to change provisions they don’t find reasonable. However, as recently as 2019, the Colorado Court of Appeals determined it is not the court’s role to rewrite contracts that would otherwise violate public policy as originally written 23 Ltd v. Herman, P.3d 754 (Colo. App. 2019). 

Employers Council is available to help members navigate this new law through online resources, consulting, and training. Contact the Member Experience team by email or call 800-884-1328.