Non-Compete Agreements in Colorado: 2022 Ban for Most Workers
Colorado took a dramatic step in 2022 by essentially banning non-compete agreements for most workers. The law makes Colorado one of the most employee-friendly states in the nation, second only to California.
The 2022 Ban
Effective August 10, 2022, Colorado law prohibits employers from using non-compete agreements except in very limited circumstances. The ban includes:
- Traditional non-compete covenants
- Training repayment agreements that function as non-competes
- Non-compete provisions in severance agreements
Narrow Exceptions
Non-competes may still be enforceable for:
Highly Compensated Workers
- Threshold: Workers earning $123,750+ annually (2024, adjusts for inflation)
- Must still meet reasonableness requirements
- Must be necessary to protect trade secrets
Sale of Business
- Non-competes in connection with sale of a business remain enforceable
- Must be reasonable in scope and duration
Recovery of Education/Training Expenses
- For workers earning $61,875+ annually (2024)
- Must be for specialized training
- Cannot function as a disguised non-compete
Requirements for Enforceable Agreements
Even for excepted workers, agreements must:
- Be provided to the worker before they accept the position
- Be signed by both parties
- State that the worker has the right to consult with counsel
- Be necessary to protect trade secrets
Penalties for Violation
Employers who violate the law face:
- Criminal misdemeanor charges
- Civil penalties up to $5,000 per violation
- Employee can recover attorney's fees and actual damages
What This Means for Colorado Workers
- Most workers are completely protected from non-competes
- Even high earners have significant protections
- Employers face real penalties for overreach
- Choice of law provisions selecting other states are likely invalid for Colorado workers
Frequently Asked Questions
Are non-competes banned in Colorado?
Yes, Colorado banned most non-competes effective August 10, 2022. Only very narrow exceptions exist for highly compensated workers (earning $123,750+ in 2024) where the agreement is necessary to protect trade secrets, and for business sales.
What is the income threshold for Colorado non-competes?
For 2024, non-competes may only be enforceable for workers earning $123,750 or more annually. Even then, the agreement must be necessary to protect trade secrets and meet other strict requirements.
What penalties do Colorado employers face for illegal non-competes?
Employers face criminal misdemeanor charges, civil penalties up to $5,000 per violation, and employees can recover attorney's fees and actual damages. This makes Colorado one of the strictest states.
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