Colorado has enacted the most significant change to its legal landscape concerning restrictive covenants in the employment context in the state’s history. By enacting House Bill (HB) 22-1317, Colorado has a) eliminated a major exception and drastically limited the remaining exceptions permitted for restrictive covenants; b) explicitly addressed nonsolicitation and confidentiality restrictive covenants for the first time; c) outlined formal notice requirements; d) limited adjudication of Colorado-based employees’ restrictive covenants to Colorado courts and Colorado law; and e) added damages, attorneys’ fee-shifting, and monetary penalties for unsuccessful efforts to enforce restrictive covenants under C.R.S. § 8-2-113. These changes will affect any restrictive covenants made or renewed on or after August 10, 2022. Those made or renewed prior to August 10, 2022, are not affected by this new law.
Current Law
Currently, under C.R.S. § 8-2-113, certain restrictive covenants, such as covenants not to compete or solicit customers, are void unless they qualify for one or more of the following exceptions: (1) the purchase and sale of a business or its assets, (2) the protection of trade secrets, (3) the recovery of education or training expenses associated with an employee who has been with an employer for less than two years, or (4) a restriction on executive or management personnel or staff.
The Amended Law: Narrower Exceptions
However, starting August 10, 2022, Colorado will...
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