Colorado Law of Non-compete Agreements Is Completely New

Posted by: Jun 15, 2022By Brian Stutheit

On June 8 Governor Polis signed House Bill 22-1317. This new law completely revises Colorado law about non-compete agreements, and restrictions on former employee use of trade secrets.

The law becomes effective August 11, 2022. It applies to covenants entered into after its effective date.

5 things the new law does:

  1. Redefines what employees can be subject to non-competition agreements or limits on use of trade secrets after leaving employment. Now, the employees who may be required to sign non-competes are only highly compensated employees. The law no longer says managers, executives, officers, or professional staff can be required to sign non-competes. The Colorado Department of Labor will define what a highly compensated employee is.
  2. Allows a “reasonable confidentiality provision” relevant to the employer’s business that does not prohibit disclosure of information that arises from the worker’s general training, knowledge, skill, or experience, whether gained on the job or otherwise, or information that is readily ascertainable to the public.
  3. Even non-competes which are otherwise permissible are void, unless the employee receives specified written information about the non-compete before commencing employment. Employees who are highly compensated can also be asked to sign non-competes after they begin employment, but the law requires that the employer give the employee 14 days notice before the non-compete becomes effective. The law also has somewhat confusing language which current employees may argue requires additional consideration in return for signing a non-compete.
  4. Prohibits any agreement that adjudication about enforce ability of the covenant be anywhere but Colorado.
  5. Actually penalizes any employer who attempts to enforce any covenant which is void under the law.

These are only highlights of the new law. The changes are significant, and impose other, detailed, requirements, on employers. Employers may still require covenants against competition when selling a business. They may also recoup costs of educating employees, under certain conditions. No employer or employee should negotiate about a non-compete or agreement protecting trade secrets after August 11, 2022, without understanding how different Colorado law is now. Employers should consider getting non-competes signed now, before the law becomes effective.