Colorado Non-Compete Agreement Overview
Colorado Restricts Non-Compete Agreements
Colorado places significant restrictions on non-compete agreements. Not all employees can be subject to non-competes. Review the state-specific requirements below to determine whether your agreement is enforceable.
Colorado significantly restricted non-compete agreements effective August 10, 2022, under the Worker's Right to Non-Compete (C.R.S. Section 8-2-113). The law prohibits non-competes for most workers unless the employee earns at or above the threshold of the 60th percentile of annual wages (approximately $112,500 for 2024, adjusted annually). Non-competes are also permitted for obligations relating to the purchase of a business, protection of trade secrets, and recovery of training expenses for employees working less than two years.
Colorado's 2022 law also imposes specific procedural requirements: the employer must provide notice of the non-compete provision to the worker in a separate document or in the relevant contract, and must give the worker at least 14 days to review the agreement before the earlier of the effective date or the requirement to sign. Violations of the statute can result in penalties of $5,000 per worker, and the worker may void the agreement and recover actual damages and attorney's fees.
Restricted
Enforceability
No statutory cap for permitted agreements
Max duration
Yes
Blue-pencil
Required for existing employees
Consideration
Colorado Enforceability Requirements
Understanding Colorado's specific rules is essential for drafting an enforceable non-compete agreement. The following provisions apply in Colorado.
Key Provisions
- Non-competes are PROHIBITED for employees earning below the 60th percentile threshold (~$112,500 for 2024)
- Non-competes for qualifying high-earners must be reasonable in scope, duration, and geography
- Employer must provide written notice of the non-compete to the worker
- Worker must have at least 14 days to review before signing
- Non-competes are permitted for sale of business, protection of trade secrets, and training expense recovery
- Violations: $5,000 penalty per worker, voided agreement, actual damages, attorney's fees
How to Draft a Non-Compete in Colorado
Follow these steps to create an enforceable non-compete agreement that complies with Colorado law.
Verify State Requirements
Confirm that your non-compete complies with Colorado's enforceability standards, including any income thresholds, duration caps, and procedural requirements.
Define Restricted Activities Narrowly
Be specific about what activities are restricted. Broad prohibitions are more likely to be struck down or modified by Colorado courts.
Set Reasonable Geographic Scope
Limit the geographic restriction to areas where your company actually operates or where the employee had client responsibility in Colorado.
Provide Adequate Consideration
Ensure the employee receives adequate consideration for the non-compete restriction. In Colorado, required for existing employees.
Include Severability and Signatures
Add a severability clause and get proper signatures from both parties. In Colorado, this helps protect the enforceable portions of the agreement if any provision is found overbroad.
Recent Legal Changes in Colorado
The Worker's Right to Non-Compete law (HB 22-1317) took effect August 10, 2022, and fundamentally changed Colorado's approach to non-competes. The income threshold is adjusted annually. Employers must comply with new notice and review period requirements.
Employer Tips for Colorado
Verify that any employee signing a non-compete meets the income threshold. Provide the required written notice and 14-day review period. Document the consideration and legitimate business interest. For employees below the threshold, use NDAs and non-solicitation agreements instead.
Employee Rights in Colorado
If you earn below the annual threshold (~$112,500 for 2024), your non-compete is likely void under Colorado law. Even if above the threshold, the agreement must be reasonable. If your employer failed to provide the required notice or review period, the agreement may be voidable. You may recover damages and attorney's fees.
Sample Colorado Non-Compete Agreement
Below is a preview of our Colorado-specific non-compete agreement. Your customized document will include all provisions required for enforceability in Colorado.
NON-COMPETE AGREEMENT
STATE OF COLORADO
Covenant Not to Compete
EMPLOYER:
Company Name: [Legal Entity Name]
Address: [Colorado Address]
Business Type: [Industry]
EMPLOYEE:
Name: [Full Legal Name]
Position: [Job Title]
Start Date: [Date]
NON-COMPETE TERMS
Restricted Activities: [Specific Activities]
Geographic Scope: [Area]
Duration: [Time Period] following termination
Consideration: [What Employee Receives]
Governing Law: State of Colorado
Colorado Non-Compete Agreement FAQ
Answers to common questions about non-compete agreements in Colorado, including enforceability, duration limits, and employee rights.
Official Colorado Resources
Use these official resources to verify Colorado non-compete enforceability rules and access state employment law information.
Colorado Department of Labor
State labor law information and employment resources
Colorado Attorney General
Consumer protection and employment law guidance
FTC Non-Compete Rulemaking
Federal non-compete rule status and developments
ABA Labor and Employment Law
American Bar Association employment law resources
Related Colorado Documents
Depending on your situation, you may need additional documents alongside your Colorado non-compete agreement.
Colorado Non-Disclosure Agreement
Protect confidential information and trade secrets
Colorado Non-Solicitation Agreement
Prevent poaching of clients and employees
Colorado Employment Agreement
Comprehensive employment terms and conditions
Colorado Severance Agreement
Separation terms with non-compete provisions
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