Colorado Noncompete Agreement: What's Included and Enforceability

Quick Facts — Noncompete Agreement Lawyers

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.

Frequently Asked Questions

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ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.


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Asked on Jun 29, 2023

Noncompete agreement geographic scope?

I recently left my job of five years and have been offered a new position with a competitor. The new employer has asked me to sign a noncompete agreement. I am concerned about the geographic scope of the agreement and need to understand what areas it would cover, and if it would prevent me from taking a position with a competitor in another state or country.

Daniel D.

Answered Jul 25, 2023

The Courts use a reasonableness standard determine if a non-compete is reasonable in time and geographic scope. It would be necessary to see the non-compete to tell you what it says, the areas it would cover and if it would prevent you from taking another position.

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Asked on Jul 13, 2023

Can a noncompete agreement be waived?

I am a small business owner in the retail industry and I am looking to hire a new employee. The employee has a noncompete agreement with their previous employer that I am concerned about. I want to know if it's possible for the agreement to be waived so that I can be sure I'm making the right decision in hiring this employee.

Thomas L.

Answered Jul 21, 2023

Yes, the parties to contracts can always agree to amendments and waivers. However, the former employer may have no interest in waiving the contract in this particular situation.

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Asked on Mar 31, 2021

Can I get out of my noncompete agreement?

I am looking at my options.

Donya G.

Answered Mar 31, 2021

You may be able to be released from a non compete. You would have to review the language in the non compete to see the expiration. DISCLAIMER The answers to these questions do not constitute legal advice and does not create an attorney-client relationship with the attorney and anyone who reviews these responses.

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Florida

Asked on May 19, 2023

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I recently accepted a job offer with a new employer and they sent me a Noncompete Agreement to sign. I have some questions about the agreement, specifically related to the choice of law. My former employer and I are in different states, and I want to make sure I understand the implications of the agreement before signing.

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Congratulations on your new job. Generally, a choice of law clause contained in a non-compete agreement indicates which state law will govern the contract. By way of general example, let's pretend we have a non-compete agreement that states the choice of law is Florida. Let's also pretend the parties to this agreement had a dispute and one party filed a lawsuit against the other in the state of New York. In this pretend scenario, because the parties agreed Florida to be their choice of law for the non-compete agreement, the court in New York would abide by that contractual agreement and apply Florida law. While choice of law clauses are commonly used to indicate what law will apply to a contract, the language used or omitted plays a significant role in their interpretation and enforceability.

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Noncompete agreement and change of control?

I recently accepted a new position with a company that has requested that I sign a noncompete agreement. I understand the agreement and the limitations it puts on me, but I am concerned about how the agreement would be affected if the company is sold or changes ownership in the future. I would like to understand my legal rights in the event of a change of control.

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If the future company buys the equity of your current employer, the Non-Compete continues in effect. If the future company buys the assets, the Non-Compete is terminated. I would request a sentence be added to the effect that "if there is a change of control of the Company (meaning more than 50% of the equity interest or 50% of the voting equity control) is sold or transferred, then this Non-Compete Agreement is terminated.

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