On March 1, 2022, Colorado amended its non-compete statute to impose criminal liability on employers who knowingly enforce void non-compete agreements against their employees. Colorado Senate Bill 21-271 raises the stakes for employers who seek to use non-competition agreements to restrict former employees from engaging in competing conduct; such violations may now be prosecuted as class 2 misdemeanors, which are punishable by up to 120 days in jail, a fine of up to $750, or both. 

This amendment to C.R.S. § 8-2-113 underscores Colorado’s continuing skepticism  non-competition agreements. As before, Colorado’s non-compete statute explicitly renders non-competition agreements void except where the following narrow exceptions apply:  

  • A contract for the purchase and sale of a business or assets of a business; 
  • A contract for the protection of trade secrets; 
  • A contract for the recovery of the expense of educating and training an employee who has worked from an employer for less than two years; or 
  • The employee is an executive, officer, or management personnel, or their professional staff.  

If one of these exceptions is met, the non-compete clause must also be reasonable in temporal and geographic scope to be enforceable.  

Confidentiality and non-disclosure agreements are generally not limited in the same way as non-competition agreements, but can be treated as non-competition agreements if they seek to restrict a former employee’s ability to seek work after separation.

In short, non-compete clauses are highly disfavored in Colorado and must be narrowly tailored to one of the statutory exceptions to be valid. If you are concerned about protecting your company’s intellectual property or have signed an employment agreement containing a non-competition clause, please reach out to us at 719-212-2890 or schedule an appointment here to discuss potential next steps.  We look forward to working with you. 

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