On June 8, 2022, Governor Jared Polis signed HB 22-1317 into law, significantly restricting the enforceability of non-competition and non-solicitation agreements in Colorado. The law, passed by the Colorado Legislature in May 2022, took effect on August 10, 2022, and applies to agreements entered into on or after that date.
Non-Compete and Non-Solicitation Agreements in Colorado Before HB 22-1317
Prior to HB 22-1317, Colorado non-compete laws deemed these agreements void, except in limited circumstances, including:
- Contracts for the purchase or sale of a business or its assets.
- Agreements involving executives, management personnel, and their professional staff.
- Contracts designed to protect trade secrets.
- Agreements requiring repayment of training expenses for employees who worked for less than two years.
New Restrictions on Non-Compete and Non-Solicitation Agreements
Under HB 22-1317, Colorado non-compete law now limits enforceability to:
- Non-compete agreements tied to the sale of a business.
- Non-compete agreements for “highly compensated employees”, defined in 2022 as individuals earning $101,250 or more per year (this amount is subject to annual adjustments).
- Non-solicitation agreements, which are enforceable only if they are narrowly tailored to protect an employer’s trade secrets and apply only to employees earning at least 60% of the highly compensated threshold (i.e., $60,750 per year in 2022).
Employers should carefully review non-compete and non-solicitation agreements to ensure compliance with Colorado HB 22-1317.
Mandatory Notice Requirement for Non-Compete Agreements
A key requirement of HB 22-1317 is that employers must provide advance written notice of a non-compete or non-solicitation agreement:
- At least 14 days before the effective date of the agreement or the date of compensation changes (e.g., a pay raise) used to justify the agreement.
- For new hires, before the employee accepts the job offer.
The notice must:
- Be in writing and presented as a separate document.
- Use clear language to ensure employee understanding.
- Be signed by the employee as acknowledgment.
Failure to comply with these notice requirements may result in the agreement being void and unenforceable under Colorado employment law.
Confidentiality Agreements and Training Cost Recovery
While confidentiality agreements are still allowed, they cannot prohibit employees from disclosing:
- General training, knowledge, skills, or experience gained on the job.
- Information readily available to the public.
- Any legally protected disclosures.
Additionally, HB 22-1317 permits training cost recovery agreements, provided that:
- The reimbursement amount is reasonable.
- The amount owed decreases proportionately over time.
These limitations align Colorado law with existing employment law standards designed to protect workers’ rights.
Prohibited Clauses & Geographic Restrictions
- Non-compete agreements with physicians remain void, though employers may seek reasonable damages for lost patient relationships.
- Non-compete and non-solicitation agreements cannot require enforcement proceedings outside of Colorado.
- Employees may request a copy of their non-compete agreement at least once per year.
Employers should ensure that Colorado restrictive covenants comply with these new legal restrictions.
Penalties for Violating HB 22-1317
Colorado’s HB 22-1317 imposes strict penalties for non-compliance, including:
- A $5,000 penalty per employee if an employer enters into, presents, or attempts to enforce a void non-compete agreement.
- The penalty is discretionary and may be avoided if the employer proves it acted in good faith and had a reasonable belief that it was compliant.
- Criminal penalties remain in place for any employer who uses threats, force, or intimidation to prevent an individual from engaging in lawful employment.
Employers should review their employment agreements carefully to avoid legal exposure under Colorado employment law.
Baird Quinn Can Help Navigate Colorado’s New Non-Compete Law
With Colorado’s HB 22-1317 significantly restricting non-compete and non-solicitation agreements, employers and employees alike need to understand their rights and obligations.
If you need legal assistance with Colorado non-compete agreements, non-solicitation contracts, or employment litigation, the experienced employment attorneys at Baird Quinn are here to help. Contact us today to discuss your case.