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Colorado’s Changes its Solicitation and Non-Compete Laws

Prior to August 2022, Colorado’s C.R.S § 8-2-113, which dictates the rules on Colorado’s non-solicitation and non-compete agreements between an employee and an employer, was relatively straightforward in nature.

Under Colorado’s previous statute, Colorado employers were forbidden from entering into non-compete agreements and customer non-solicitation agreements, unless they met one of the following statutory exceptions:

(a) Any contract for the purchase and sale of a business or the assets of a business;
(b) Any contract for the protection of trade secrets;
(c) Any contractual provision providing for recovery of the expense of educating and training an employee who has served an employer for a period of fewer than two years;
(d) Executive and management personnel and officers and employees who constitute professional staff to executive and management personnel.

Colorado law firmHowever, after the passage of HB 22-1317, which amended CO Statute § 8-2-113, the current landscape of non-compete covenants, Customer non-solicitation agreements, and non-compete agreements has shifted dramatically. Colorado has now joined a large number of states that have expanded employee protections to protect against non-compete or customer non-solicitation agreements.

Under the new Colorado law, “any covenant or contract” for non-competition and customer non-solicitation agreements are now void, with only a few limited exceptions. Specifically, employees must be made above a threshold amount for non-compete and non-solicitation agreements to be valid.

NON-COMPETE AGREEMENTS: In regular, non-legalize terms, this means that workers that make under $101,250.00 Dollars cannot enter into a non-compete agreement if their income is below this threshold amount at the time the employee enters into the contract, and the time the employer attempts to enforce the contract. Then, if the employee does meet the threshold requirement, the non-compete agreement must be designed to protect trade secrets, and may be no broader than necessary or required to protect trade secrets.

NON-SOLICITATION AGREEMENTS: Colorado has now established a minimum compensation threshold for customer non-solicitation agreements. Thus, workers or employees who make 60% of the minimum compensation threshold, or less than $60,750 Dollars, cannot be required to enter into agreements to not solicit customers. The main caveat with these amendments is the restrictions imposed by Colorado’s new amendment to C.R.S §8-2-113, which provides for 3 exceptions for non-solicitation agreements:

I. Provisions providing for an employer’s recovery of the expense of educating and training a worker where the training is “distinct from normal on-the-job training,” information that can be gathered or “be readily ascertained by the public,” and information that the worker has a legal right to disclose;
II. Reasonable confidentiality agreements; and
III. Restrictive covenants imposed as part of the sale of a business.

With these new changes, many businesses are adopting new non-solicitation and non-compete agreements. However, fear not! If your employee has signed a non-compete covenant or non-solicitation of customers agreement that was in compliance with Colorado’s previous version of C.R.S § 8-2-113 before the amendment was passed on August 10th, 2022, those agreements or covenants are valid as the amendment is not retroactive in application.

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