On May 3, 2022, the Colorado Senate passed House Bill 22-1317 which, if enacted into law, would significantly limit the enforceability of any non-compete agreements executed after the law’s effective date for employers with employees working or living in Colorado.

If Governor Jared Polis signs the proposed legislation, it could go into effect as early as August 10, 2022.

Exceptions to General Non-Compete Prohibition

Most significantly, the bill would amend Colorado’s non-compete statute, C.R.S. § 8-2-113, to eliminate most of the current exceptions to Colorado’s general rule voiding most non-compete agreements. It also would make enforcement of the permitted agreements much more difficult.

The new law would eliminate the exception permitting non-compete agreements involving managers, executives, or professional staff to managers or executives, as well as the exception permitting agreements deemed necessary solely for the protection of trade secrets.

Under the new law, exceptions to the general rule will exist only for two types of agreements:

1. Those involving “highly compensated employees” (HCEs) (currently, those earning at least $101,250), but only where the covenant in question was designed to protect trade secrets; and
2. Covenants for the non-solicitation of customers for employees earning over 60 percent of the HCE salary threshold.

For both types of agreements, the new law would require that the salary threshold be met both at the time the contract was executed and “...

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