A new Colorado law, effective March 1, 2022, will make violations of the state's noncompetition statute a Class 2 misdemeanor punishable by 120 days in jail, a fine up to $750, or both.

Colorado's noncompetition statute, C.R.S. § 8-2-113, prohibits the use of "force, threats, or other means of intimidation to prevent any person from engaging in any lawful occupation at any place he sees fit." Covenants not to compete restricting the right of any person to receive compensation for performance of skilled or unskilled labor for any employer are void under the statute unless they satisfy any one or more of the following exceptions:

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

Covenants not to compete that satisfy one or more of the statutory exceptions must also be reasonable in time, geographic scope and scope of activities covered. Colorado courts have held that nonsolicitation of customers' provisions are also subject to C.R.S. § 8-2-113, but nonsolicitation of employees' provisions are not subject to the statute.

The statute also prohibits covenants not to compete in employment,...

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