In May 2022, Colorado lawmakers passed a law imposing new restrictions on employee non-compete clauses. The new statutory amendment goes into effect on August 10, 2022.
HB 22-1317 provides for new income-based limits for employees against whom noncompete and antisolicitation clauses may be enforceable. Noncompetes are only enforceable against employees who meet the threshold for highly compensated workers, currently $101,250.00 (increasing annually). Antisolicitation clauses (clauses restricting an employee’s ability to recruit the employer’s customers) are only valid against employees making 60% or more of the threshold amount for highly compensated workers, currently $60,750.00. Even for workers who make more than $101,250.00, noncompete and nonsolicitation clauses must be “no broader than reasonably necessary to protect the employer’s legitimate interests in protecting trade secrets” pursuant to C.R.S. § 8-2-113(2)(d).
The new law requires Colorado law to apply in determining whether a noncompete clause is enforceable against an employee who, at the time of termination of employment, lived or worked in Colorado. Workers also may not be required to adjudicate the enforceability of the covenant outside of Colorado. C.R.S. § 8-2-113(6).
Employers should carefully consider their noncompete and nonsolicitation agreements to assess their compliance with Colorado employment law. Violations of the noncompete law can lead to criminal penalties, liability for actual damages, and a $5,000.00 penalty per harmed worker or prospective worker. If you have questions about what changes to make in light of this legislative change, the attorneys at MoGo LLC would love to review your business’s practices and agreements with you.
If you are an employee with questions about whether your noncompete is enforceable, the attorneys at MoGo LLC can help! Get in touch for a free consultation.