Revised Colorado Noncompete Law Goes Into Effect March 1, 2022

Posted by: Karen Booher on February 6th, 2022

Noncompete agreements have long been standard practice in many companies. But employers need to be aware of changing laws regarding non-compete agreements which vary from state to state.

On July 6, 2021, Governor Jared Polis signed into law Senate Bill 21-271 on misdemeanor reform, which takes effect on March 1, 2022. On page 26 of this 304-page bill is an amendment to Colorado’s noncompete statute, Colorado Revised Statute section 8-2-113, under which a person who violates the statute commits a class 2 misdemeanor. Under the bill, class 2 misdemeanors committed on or after March 1, 2022, are punishable by up to 120 days in jail, a fine of up to $750, or both.

In Section 8-2-113, it is “Unlawful to intimidate worker—agreement not to compete,” voids any non-compete agreement that “restricts the right of any person to receive compensation for performance of skilled or unskilled labor for any employer,” with certain statutory exceptions for the sale of a business, the protection of trade secrets, the recovery of expenses for educating and training employees in certain conditions, and executive and management personnel and their professional staff.

Colorado courts have held that an agreement not to solicit customers is a form of a noncompete agreement. The statute also provides that it “shall be unlawful to use force, threats, or other means of intimidation to prevent any person from engaging in any lawful occupation at any place he sees fit.”

Although there is limited guidance on what conduct would constitute improper force, threats, or intimidation under the statute, Colorado employers and managers should be mindful of this broad language considering potential criminal liability. Colorado employers should also ensure that their non-compete and customer non-solicitation agreements are presented to and enforced against only those employees falling under the statute’s permitted exceptions.

Source:

ASA Weekly Legislative Update, Jan. 27, 2022. “Noncompete Laws: 2021 Year-in-Review”, by Lexology (01/13/22) Lian Jr., Robert G.; Patterson, Brian Glenn; Stahl, Courtney L.