Nelson Mullins is continuously monitoring trends and state law changes regarding restrictive covenants in employment agreements. Several states have recently enacted or modified legislation that may significantly restrict an employer’s ability to regulate their former employees’ post-employment activities. Likewise, several other states are considering legislation that would significantly alter the application and enforceability of non-competes. The information below provides a non-exhaustive summary of important current and prospective changes to state non-compete and restrictive covenants laws that employers should further consider with the assistance of counsel.
Recently Enacted State Law on Restrictive Covenants
Colorado
In July 2021, a Colorado bill concerning misdemeanor reform was signed into law. Embedded in this bill was an amendment to Colorado’s existing non-compete statute categorizing a violation of it as a class 2 misdemeanor. While the current non-compete law is somewhat unclear, it generally prohibits employers from intimidating an employee from maintaining subsequent employment with limited exceptions, such as prohibitions reasonably necessary to protecting an employer’s trade secrets. Though further changes to the law, which are partially aimed at clarifying the law’s current text, are on the horizon, its existing statute remains unchanged and effective through August 2022. Employers must be especially careful regarding how they draft and use...
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