In August of 2022, the Colorado Legislature amended Colorado's law governing covenants not to compete, making them significantly more difficult to enforce. Covenants not to compete prohibit employees from competing against a former employer and/or soliciting its customers (in Colorado, restrictions on soliciting other employees are not governed by the same standards).
Among other things, the new law requires written notice to a prospective or current worker prior to the effective date of the covenant not to compete. For example, if an employer hires an employee for a position the duties of which include having access to the employer's trade secrets, and asks that employee to sign a covenant not to compete to protect the trade secrets, notice would clearly be required. However, the question has arisen whether written notice is required with other kinds of agreements.
The previous law did not apply to confidentiality agreements or agreements for the recoupment of training expenses, and imposed more lenient standards for covenants not to compete related to the purchase of a business. Confidentiality agreements and agreements for recoupment of training expenses do not prohibit competition. There are sound reasons for a covenant not to compete in connection with the purchase of a business which are not present in other contexts—protecting the assets that are being purchased.
The new law also differentiates such agreements. Section 3 of the new law provides that the following...
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