Sophia Serrao
Wed, 06/01/2022
Colorado recently substantially limited the use of non-competes for employees who work and live in Colorado. Non-compete agreements preclude former employees from entering into competition with an employer, typically for a period of time or geographic area. Colorado’s legislation follows a nationwide trend, such as DC’s Ban on Non-Compete Agreements
On May 10, 2022, the Colorado legislature passed a bill that limited the validity of non-competes. For a non-compete agreement to be valid in Colorado it must meet two conditions: (1) the restriction must be narrowly drawn to protect trade secrets, and (2) the employee must meet the “highly compensated” test. The current income requirement is at least $101,250, but will be adjusted annually by the Colorado Department of Labor.
The bill does allow non-solicitation provisions, which limit employees from soliciting the employer’s clients and typically do come with a geographic area limitation. Colorado will allow non-solicitation agreements for employees making 60% of the highly compensated employee standard. The agreement can also not be broader than reasonably necessary to protect the employer’s legitimate interest in protecting trade secrets.
The statute also requires cases involving Colorado employees to be litigated in Colorado under Colorado law, imposes notice obligations, and provides for damages, attorney fees, and a $5,000 per employee penalty for violations.
There are nine jurisdictions that have some prohibition on non-competes for low wage workers: DC, Maine, Maryland, New Hampshire, Washington, Rhode Island, Illinois, Virginia, and Massachusetts. Moreover, Oklahoma, North Dakota and California have wide bans on non-compete agreements.
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