Colorado has significantly revised its laws concerning noncompetition and nonsolicitation covenants and has drastically narrowed employers’ ability to both use and enforce them. Currently, Colorado law generally permits noncompete and nonsolicitation covenants in connection with: (1) the purchase and sale of a business or its assets, (2) protecting trade secrets, (3) recouping certain education or training expenses from employees, and (4) executive or management personnel.
The new law, which applies to agreements made or renewed on and after August 10, 2022, narrows the trade secret and training expenses exceptions and eliminates the executive or management personnel exemption. Employers should contact their Vorys lawyer with questions about how these changes will affect their agreements that contain restrictive covenants.
The new law authorizes noncompete covenants to protect trade secrets, and the covenant must be “no broader than is reasonably necessary to protect the employer’s legitimate interest in protecting trade secrets.” Further, a noncompete covenant to protect trade secrets may only be used with employees who earn an amount equivalent to or greater than what a “highly compensated worker” earns – both when the covenant is entered into and when it is enforced. In 2022, a highly compensated worker is one who earns $101,250. This salary threshold will increase to $112,500 in 2023 and to $123,750 in 2023;...
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