Colorado Noncompete Agreement: What's Included and Enforceability

Is a Non-Compete Agreement Enforceable in Colorado?

In Colorado, non-compete agreements are generally unenforceable unless they meet one of the few limited exceptions laid out in the new non-compete legislation that went into effect on August 10, 2022.

Although this law provides exceptions to the ban on non-compete agreements, the exceptions are very limited and Colorado laws are very worker friendly.

The new regulations include the following provisions:

• All non-compete agreements are void unless they are entered into with a “highly compensated” worker. The 2022 wage threshold for “highly compensated” is $101,250 annually.
• The employee must be employed for at least two years to enforce a non-compete.
• All non-compete agreements not designed to protect trade secrets are void.
• Non-compete agreements that are more broad than necessary to protect an employer’s interests are void.
• Prospective workers must be provided with the non-compete agreement before they accept the job.
• Current employees must be notified at least 14 days before signing the agreement and provided with a summary of the restrictive terms.
• All non-compete disputes are required to be adjudicated in Colorado courts under Colorado laws.
• Non-compete agreements are prohibited for lawyers and physicians.

Like many other states, Colorado requires non-compete agreements to be reasonable in duration and geographic scope. Courts will review the individual facts of each agreement to determine reasonableness.

Is the New Colorado Non-Compete Law Retroactive?

The new Colorado non-compete laws are not retroactive. This legislation was passed on August 10, 2022, and only applies to non-compete agreements entered into after this date. Any non-compete agreements that were executed before August 10, 2022, are still subject to the previous Colorado laws that governed non-compete agreements.

How Long Does a Colorado Non-Compete Agreement Last?

Colorado laws do not include a limit on the duration of non-compete agreements. Instead, we look at how courts have ruled on non-compete disputes to determine what is generally considered reasonable.

Based on past cases, a duration of one year for a non-compete agreement is usually considered reasonable. It should be noted that contracts with durations of up to five years have also been upheld because the reasonableness of duration will depend on the specific facts surrounding the case.

How Do You Get Around a Non-Compete Agreement in Colorado?

The laws governing non-compete agreements in Colorado favor the worker, not the employer, so there are several ways to get around or beat a non-compete agreement. If an employee can prove that the contract does not fit into one of the narrowly tailored exceptions, then the contract will be enforceable.

One exception requires that non-compete agreements must be designed specifically to protect a trade secret. Colorado statutes consider the following business information as “trade secrets”:

• Scientific or technical information
• Designs, processes, procedures, or formulas
• Confidential business or financial information
• Lists of names and personal information

Furthermore, to be considered a trade secret, the employer must have taken measures to prevent the information from becoming available to other people.

If a non-compete agreement doe does not protect a trade secret, it cannot be enforced.

What Voids a Colorado Non-Compete Agreement?

Any contract that is overly broad or unreasonable will be deemed void in Colorado. Unlike other states which allows courts to modify agreements to make them enforceable (a practice called blue penciling), Colorado does not permit this practice. If any term is unenforceable, the entire contract is determined to be unenforceable.

Additional reasons that a Colorado non-compete may be voided include:

• The employee was not given notice about the contract.
• The contract was not signed by the employee.
• The employee makes less than the wage threshold that allows non-compete agreements.