During the 2022 legislative session, Colorado passed a new state law regarding the applicability of non-disclosure agreements. The new law is enshrined as C.R.S. § 8-2-113 and states that any agreement that restricts the right of any person to be paid for the performance of work shall be void unless it falls under a specific exception for highly compensated employees.
Under this law, a highly compensated employee is defined as an individual making above a threshold amount at both the time that the non-compete is entered and the time at which it is enforced. For the year 2022, the annual payment to qualify as a highly compensated employee was $101,250.
This particular exception under the law requires not only that the employee is highly compensated, but also that the agreement not to compete is for the protection of trade secrets, and is no broader than reasonably necessary to protect those trade secrets.
To reiterate, the three requirements that a noncompete agreement must meet are as follows:
- The employee must be highly compensated;
- The agreement must be for the purpose of protecting trade secrets; and
- The agreement must be no broader then is reasonably necessary for the protection of those trade secrets.
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