Are Non-Competes Enforceable in Colorado and What the Statute Actually Requires
Colorado Non-Compete Law: What Changed in 2022 and Again in 2025
Many non-compete agreements in circulation across Colorado started somewhere else: a template downloaded from a form site, a copy carried over from a prior job with the old employer's name swapped out, or an agreement drafted before 2022 and never revisited. The assumption behind all three is that a signed document is enforceable. Colorado does not work that way. A signature alone does not make a non-compete enforceable. For covenants governed by the current statute, the state starts from the position that a covenant not to compete is void and then recognizes a narrow set of exceptions. An agreement that does not fit an exception is not merely weak; the prohibited covenant is void. The answer depends both on what the agreement says and on whether it satisfies the statute.
What Many Business Owners Get Wrong About Non-Competes in Colorado
Here is what tends to get glossed over when a business owner hands a non-compete to a new hire:
That the statute treats a covenant not to compete as void by default, which makes enforceability the narrow exception an agreement has to earn
That the earnings test is measured twice, once at signing and again at enforcement, so a covenant that qualified on the day it was executed can quietly stop qualifying
That a worker's signature does not cure a missing notice, because the statute voids an otherwise permissible covenant when the notice was never delivered
That presenting or attempting to enforce a void covenant can itself create exposure, even if the employer never files a lawsuit
Each issue can matter before a court ever reaches the covenant's detailed wording.
Are Non-Competes Enforceable in Colorado: The Short Answer
Yes, some are, but many agreements in employers' files do not qualify. Under the Colorado statute that governs covenants not to compete, C.R.S. § 8-2-113(2)(a) generally makes void a covenant that restricts a person's right to receive compensation for performing labor unless the covenant fits a statutory exception. Non-competes are not enforceable in Colorado by default, so the real question is whether a particular agreement satisfies the applicable exception and other statutory requirements.
This framework generally applies to covenants entered into or renewed on or after August 10, 2022, when HB 22-1317 took effect. SB 25-083 changed the sale-of-business and health-care-provider provisions effective August 6, 2025; its applicability should be evaluated against the amendment's effective-date language and the date the covenant was entered into or renewed.
An agreement entered into before August 10, 2022, is not automatically void under the current framework. Its enforceability generally turns on the prior version of the statute and applicable case law, subject to questions such as whether the covenant was later renewed or modified. The General Assembly also preserved pre-August 10, 2022, state and federal case law on the permissible scope of trade-secret covenants.
Where the Federal Non-Compete Rule Ended Up
Many Colorado business owners remember the FTC's rule that would have broadly prohibited non-competes, but that rule never took effect. A federal district court set it aside nationwide in Ryan, LLC v. FTC in August 2024. The FTC later dismissed its appeals in September 2025, and the rule was removed from the Code of Federal Regulations in February 2026.
There is currently no generally applicable federal ban on employee non-competes. State law ordinarily governs enforceability, while the FTC may pursue particular practices case by case under Section 5 of the FTC Act. Other federal statutes or regulations may also matter in specific industries or circumstances.
For most Colorado employers, Colorado law remains the central source for determining whether an agreement is enforceable. The vacated FTC rule does not replace that state-law analysis.
What the Statute Actually Requires for a Non-Compete to Survive
A Colorado non-compete governed by the current statute must satisfy each applicable requirement described below. Failure to meet a statutory condition can render the covenant void. Although courts may sometimes narrow an overbroad restriction under preserved case law, employers should not assume that judicial reformation will cure a failure to satisfy threshold eligibility, purpose, or notice requirements.
The Worker Has to Earn Above the Highly Compensated Threshold
The statute incorporates the highly compensated employee threshold set by the Colorado Division of Labor Standards and Statistics and adjusted periodically. For 2026, the threshold is $130,014 in annualized cash compensation under the applicable CDLE PAY CALC Order that took effect on February 1, 2026. Because the amount changes, employers should confirm the order in effect when the covenant is entered into.
The test runs twice. Subsection (2)(b) applies only if the worker meets the applicable threshold when the covenant is entered into and again when it is enforced. That second measurement is easy to overlook.
Annualized cash compensation means the gross salary or wage amount, fee amount, or other compensation amount for a full year. If a worker has been employed for less than a calendar year, the question is whether the worker reasonably expects to earn at least the applicable threshold over a calendar year of employment.
Under subsection (2)(c)(II), the applicable figure is generally the greater of the threshold in effect on August 10, 2022, or the threshold in effect when the covenant was entered into. The same applicable figure is then used to assess compensation both at execution and at enforcement. Thus, the 2026 figure generally governs a covenant entered into in 2026; it does not automatically replace the applicable threshold for a covenant entered into in 2023.
A covenant that depends on a raise may be fragile. If a worker falls below the applicable threshold before enforcement because of a pay cut, a light commission year, or a move to part-time work, the covenant may no longer qualify for the exception.
The Covenant Has to Protect Trade Secrets
Subsection (2)(b) permits a covenant only where it is for the protection of trade secrets, and that is the only purpose the statute allows. The covenant has to exist because there is actually something secret to protect, and not because a departure would be inconvenient or expensive.
Keeping a good salesperson, estimator, or technician from working for a competitor is not, by itself, a trade-secret interest. Nor are ordinary training and general customer relationships necessarily trade secrets. The employer must identify information that actually qualifies for protection under trade-secret law.
You should be able to identify the claimed secret with reasonable specificity and explain why it is not generally known or readily ascertainable, why it has independent economic value, and what reasonable measures protect it. A nonpublic pricing formula, proprietary process, confidential bidding method, unpublished supplier terms, or source code may qualify, depending on the facts. Labels alone are not enough.
Subsection (3)(b) confirms that a confidentiality provision may not prohibit disclosure of information arising from a worker's general training, knowledge, skill, or experience; information readily ascertainable to the public; or information the worker otherwise has a legal right to disclose. Those limits help distinguish protectable confidential information from ordinary know-how.
It Has to Be No Broader Than Reasonably Necessary
Subsection (2)(b) also requires that the covenant be no broader than is reasonably necessary to protect the employer's legitimate interest in protecting trade secrets. Breadth is measured against that interest, and not against what the business would prefer to prevent.
Duration, geography, and the range of activity the restriction covers are where business owners go wrong. A covenant that runs longer than the secret stays valuable is protecting nothing at the back end of its term. A covenant that reaches territory the business does not serve is claiming ground where there is no interest to protect. A covenant that bars the worker from an entire industry, rather than from the narrow work that touches the secret, is broader than the interest it claims to protect.
The reasonableness analysis did not start over in 2022. Subsection (1)(b) expressly preserves state and federal case law in effect before August 10, 2022, concerning how a trade-secret covenant must be tailored in scope to be enforceable. That body of law continues to inform the scope analysis.
Breadth is not free. A broad clause is not necessarily stronger; it simply presents more grounds for challenge.
The Worker Has to Get Separate Written Notice
Notice is a requirement that can quietly void an otherwise permissible agreement. A covenant that would otherwise be permitted under subsection (2) or (3) is void unless notice of the covenant and its terms is provided in the manner the statute requires. Getting the threshold and scope right does not cure defective notice.
A prospective worker must receive the notice before accepting the offer of employment. A current worker must receive it at least 14 days before the earlier of the covenant's effective date or the effective date of any additional compensation or change in employment terms that provides consideration for the covenant.
Here is what subsections (4)(b) and (4)(d) require of the notice itself:
A separate document, rather than a notice provision embedded in the agreement itself
Clear and conspicuous terms, in the language the worker and employer use to communicate about the worker's performance
The worker's signature, on the notice
A copy of the agreement, provided with the notice; the notice must identify that agreement by name, state that it contains a covenant not to compete that could restrict the worker's options for subsequent employment, and direct the worker to the specific sections or paragraphs containing the covenant
On request, an employer must provide a worker with an additional copy of the covenant, but the employer need not provide more than one copy per calendar year.
Customer Non-Solicitation Covenants Are Held to a Lower Bar, Not No Bar
The customer non-solicitation clause is the one most business owners reach for when the non-compete starts to look shaky. It feels like the moderate version.
Subsection (2)(d) permits a covenant not to solicit customers if the worker earns at least 60% of the applicable highly compensated employee threshold when the covenant is entered into and when it is enforced. The covenant must also be no broader than reasonably necessary to protect the employer's legitimate interest in protecting trade secrets. For a covenant entered into in 2026, 60% of the $130,014 threshold is $78,008.40. Employers should confirm the applicable threshold for the year of execution.
Protection of trade secrets remains the permitted purpose. A non-solicit designed only to prevent customers from following a worker, without a qualifying trade-secret interest, does not satisfy that requirement. The notice rule in subsection (4) also reaches covenants permitted under subsection (2), so a customer non-solicit requires the same separate, signed notice.
The lower bar is a lower earnings number and nothing else.
What You Can Still Use When a Non-Compete Is Off the Table
Losing the non-compete is not the same as losing all protection. Subsection (3) identifies several types of provisions outside subsection (2)'s general prohibition. Two often carry much of the practical weight for Colorado businesses.
Confidentiality and Trade Secret Provisions
Subsection (3)(b) permits a reasonable confidentiality provision relevant to the employer's business, and subsection (2)'s general prohibition does not reach it. There is no earnings threshold. For many Colorado businesses, this is the protection they actually need because the concern is information leaving with the worker, not the worker leaving. Understanding what a non-disclosure agreement actually does and when a business needs one helps determine which document belongs in the file.
Here is what (3)(b) says a confidentiality provision cannot do:
It cannot prohibit disclosure of information arising from the worker's general training, knowledge, skill, or experience, whether that was gained on the job or otherwise
It cannot prohibit disclosure of information that is readily ascertainable to the public
It cannot prohibit disclosure of information the worker otherwise has a right to disclose as legally protected conduct
A confidentiality clause written to lock up everything the worker learned is claiming ground the statute already carved out. The clause that holds is drawn to defined, genuinely non-public information.
Training Repayment Provisions
Subsection (3)(a) permits a provision for an employer's recovery of qualifying education and training expenses. This provision may help a business that pays for a certification or license and then sees the worker leave soon afterward.
Four limits make the provision permissible. The training has to be distinct from normal, on-the-job training. The recovery is limited to the reasonable costs of the training. The amount recoverable has to decrease over the course of the two years after the training was completed, proportionately based on the number of months that have passed. And recovering the cost cannot violate the Fair Labor Standards Act of 1938 or article 4 of title 8, which is Colorado wage law.
The declining balance is often drafted incorrectly. A flat repayment amount that stays the same regardless of when the worker leaves does not fit the statutory exception. Recovery
Non-Competes Tied to the Sale of a Business Follow Different Rules
Subsection (3)(c) creates a separate exception for certain covenants made in connection with the purchase and sale of a business, an ownership interest, or business assets. The employee compensation thresholds in subsection (2) do not govern this exception, although statutory limits and ordinary reasonableness principles still matter.
A price that includes goodwill reflects the customers and reputation the seller built. A reasonably tailored covenant can help protect that value by limiting the seller's ability to recreate the same business immediately after closing, but it remains only one part of the transaction's protections.
Effective August 6, 2025, SB 25-083 expanded the sale-of-business exception to expressly cover the purchase and sale of a direct or indirect ownership interest in a business, as well as a business or all or substantially all of its assets. The amendment matters because many transactions are structured as equity purchases rather than asset purchases. Applicability still depends on the amendment's effective-date language and the covenant's date.
The same bill also put a limit on how long one of these covenants can run for a minority owner.
The Minority Owner Cap Added in 2025
The cap applies to an individual who owns less than fifty percent of the business and who received that ownership share as equity compensation, or otherwise in connection with services rendered. Both halves have to be true at once, so a founder who bought in with cash is not in this group, and neither is a majority holder.
For a covered minority owner, the statutory maximum duration is calculated by dividing the consideration the individual receives from the sale by the individual's average annualized compensation from the business. The statute defines the compensation included in that calculation and the applicable lookback period, generally the preceding two years or the shorter period of affiliation. Deal counsel should verify the inputs rather than relying on salary alone.
The arithmetic is easier to follow in multiples. If a covered minority holder's qualifying sale consideration equals twice the applicable average annual compensation, the formula yields a two-year cap. If it equals half of that compensation, the formula yields a six-month cap.
The formula supplies a statutory ceiling, not a presumption that every covenant up to that ceiling is reasonable. A five-year covenant given by a covered minority owner may be shortened by the formula regardless of what the purchase agreement says, and its remaining scope must still be defensible.
What That Changes About How You Paper a Deal
The covenant used to be an assumption inside a deal. Now it is a term that has to be priced and checked. Part of what a buyer pays for is the seller's agreement to stay out, and if the cap shortens that agreement, the buyer is getting less than the deal assumed. That is a valuation question before it is a drafting question, and it sits alongside the ownership terms a buy-sell agreement puts in place long before a buyer shows up.
Diligence now has to surface, for each person giving a covenant, how much of the business that person owns, how the interest was acquired, what the person is receiving from the sale, and what the person has been paid over the relevant period. Those facts belong in the due diligence a buyer works through before signing, because they are the inputs to the cap and not loose ends to sort out after closing.
Why Health Care Providers Are a Separate Question Now
SB 25-083 took effect August 6, 2025, and replaced the former physician-specific provision with a broader health-care-provider rule. Whether the amendment governs a particular covenant depends on the statutory effective-date language and whether the agreement was entered into or renewed after the effective date; an older agreement should not be treated as automatically invalidated without that analysis.
The rule makes void a non-compete or customer non-solicitation covenant that restricts the practice of medicine, advanced practice registered nursing, or dentistry by a covered provider. The covered categories include certified midwives as specified by statute. Compensation level and a claimed trade-secret interest do not restore a covenant barred by this provider-specific rule.
SB 25-083 removed the former physician provision that had permitted certain damages related to termination and competition. Employers should not assume that a clause labeled "liquidated damages" avoids the new prohibition; enforceability depends on the amended statute, its applicability, and the substance of the payment obligation.
The statute also protects specified communications to patients about a provider's departure, new practice or employer, contact information, and the patient's right to choose a provider. The precise patients, content, and timing covered by the statute should be checked before sending a notice; the amendment broadened protection beyond the prior rare-disorder provision.
What It Costs to Get a Colorado Non-Compete Wrong
Some business owners assume the worst case is that the covenant will not be enforced, making an aggressive non-compete look like a free option. Colorado law creates additional risk because prohibited conduct can include entering into or presenting a void covenant, not only attempting to enforce it.
Presenting a Void Agreement Is Its Own Violation
Subsection (8)(a) prohibits entering into, presenting to a worker or prospective worker as a term of employment, or attempting to enforce a covenant that is void under the statute. That means potential exposure can begin with an offer or agreement, before any enforcement lawsuit.
Subsection (8)(b) authorizes actual damages and a $5,000 penalty for each worker or prospective worker harmed by prohibited conduct, along with specified injunctive and private remedies, costs, and attorney fees. The statute also permits a court or the Division of Labor Standards and Statistics to decline or reduce the penalty when the employer acted in good faith and had reasonable grounds for believing it was not violating the section. Even so, distributing the same void template to multiple workers can create multiplied exposure.
Good faith is therefore relevant to the statutory penalty, but it is discretionary, not a reliable substitute for compliance, and it does not necessarily eliminate other available remedies.
Colorado Law and a Colorado Courtroom
Subsection (6) answers two different questions. A covenant applying to a worker who, at termination, primarily resided or worked in Colorado may not require the worker to adjudicate enforceability outside Colorado. Separately, notwithstanding a contrary contractual provision, Colorado law governs enforceability for a worker who, at termination, primarily resided and worked in Colorado. The forum rule requires either connection; the governing-law rule requires both.
An out-of-state forum clause cannot override the statutory forum protection when its residence-or-work test is met. Colorado's governing-law rule applies only when the separate residence-and-work test is satisfied.
Subsection (7) allows the worker, or a subsequent employer that has hired or is considering hiring the worker, seek a declaratory judgment from a court of competent jurisdiction or an arbitrator that the covenant is unenforceable. A prospective employer can therefore test the covenant without waiting for an enforcement suit.
Common Non-Compete Mistakes Colorado Business Owners Make
Common failures often arise before any dispute about scope or duration:
The template pulled from another state, drafted against another state's rules and carrying neither the Colorado notice step nor the earnings test
The covenant handed over on the first day, presented after the candidate already accepted the offer, which is a timing failure the worker's signature cannot repair
The same agreement given to every employee, regardless of pay, which sweeps in workers well under the threshold and turns one template into exposure measured per worker
The contractor handed an employee non-compete, drafted for a relationship the parties do not have, when the better starting point is what an independent contractor agreement should actually cover
The clause nobody re-checks when someone's pay drops, because the earnings test is measured again at enforcement
The out-of-state forum clause left in a company-wide agreement even though Colorado's statutory forum rule may override it
Each issue is easier to address before the agreement goes out and potentially far more expensive to handle later.
When to Work With an Attorney on a Colorado Non-Compete
Here is when working with a lawyer on a Colorado non-compete actually changes the outcome:
A deal with an ownership rollover, where minority holders keep equity and the duration cap has to be worked out before anyone signs
A workforce spread across more than one state, where one template has to answer to Colorado and still work everywhere else
A practice or clinic that employs health care providers covered by the 2025 health-care rule, where compensation does not cure a prohibited covenant
An agreement already in circulation, where the real question is whether it gets pulled and reissued
Some businesses do not need a non-compete at all. A small business focused on protecting genuinely confidential customer information may be better served by a tailored confidentiality provision, depending on the facts. Drafting a covenant that does not satisfy Colorado law adds risk rather than protection.
At Hristopoulos Law, we work with Colorado business owners to evaluate restrictive covenants before they become disputes. Whether you need a compliant non-compete, a confidentiality provision tailored to protect legitimate business interests, or candid advice about whether a restrictive covenant belongs in your agreements, contact us to schedule a consultation.
Colorado Non-Compete Compliance Starts Before Signing
Enforceability in Colorado depends on how and when an agreement was made; a signature alone is not enough. A defensible covenant begins with the applicable version of the statute, an eligible worker, a genuine trade-secret interest, a reasonably tailored restriction, and the notice Colorado law requires.
Scope and duration attract attention, but earlier decisions, who receives the agreement, what interest it protects, which statutory version applies, and when notice is delivered, can decide enforceability before those terms are litigated.
Ready to Get Your Colorado Non-Compete Right
At Hristopoulos Law, we draft and review Colorado non-competes for business owners who are preparing to hire, to sell, or to bring on a partner. Whether you are documenting a new hire or negotiating the covenant that carries a business sale across the closing table, contact us before signing to discuss the agreement and the law that applies.
Disclaimer
This article is provided for general informational purposes only and does not constitute legal advice. Laws, regulations, compensation thresholds, and agency positions can change, and this article may not reflect every development or fact-specific exception. Reading this article or contacting Hristopoulos Law through this website does not create an attorney-client relationship. Enforceability depends on the agreement's language, purpose, date, notice, the worker's role and compensation, and other facts. Consult a qualified attorney about your specific non-compete or restrictive covenant.