2022 Colorado Legislative Session Brings Big Changes to Employment Law
May 25, 2022
By: Colin A. Walker
As in past legislative sessions, in 2022, the Democratically-controlled legislature had a keen interest in workplace legislation, substantially amending some of the most important employment statutes.
Non-Compete and Non-Solicitation Agreements
House Bill 22-1317 dramatically changed the law of non-compete and non-solicitation agreements in Colorado. Like the old law, this law provides that such agreements are void with certain limited exceptions. The exceptions under the new law, however, are much narrower.
Non-compete agreements are enforceable against employees who, at the time the employee enters into the agreement and at the time it is enforced, are highly-compensated employees under the Colorado Department of Labor and Employment’s (“CDLE”) PAY CALC Order. In 2022, the threshold for highly-compensated employees is $101,250 per year. In addition, the restriction must be for the protection of the employer’s trade secrets and no broader than reasonably necessary to protect the trade secrets.
Non-solicitation of customer agreements are covered by the new law unless the worker earns, at the time the employee enters into the agreement and at the time it is enforced, more than 60% of the highly-compensated worker threshold under the PAY CALC Order and the restriction is no broader than reasonably necessary to protect the employer’s trade secrets.
Unlike the prior law, there is no exception for executive and management personnel or their staff. However, restrictions regarding the purchase and sale of a business or assets of a business, to recoup training expenses, for repayment of a scholarship provided to an employee working in an apprenticeship if the employee fails to comply with the conditions of the scholarship, and confidentiality agreements are not prohibited.
Furthermore, to have an enforceable non-compete or non-solicitation agreement, an employer must provide the employee with a written notice, on a separate document, signed by the employee, which clearly sets forth the terms of the agreement. For existing employees, the notice must be provided 14 days before the earlier of the effective date of the restriction, or a change in terms and conditions of employment. For new employees, the notice must be given before the employee accepts employment. Employees may request a copy of the agreement once per year.
The new law also makes litigation by employers more difficult. Choice of law and venue provisions requiring application of law other than Colorado law or requiring litigation outside of Colorado are void.
It also provides for more robust enforcement. If an employer tries to enforce a void non-compete or non-solicitation agreement, it will be subject to a civil action by employees for damages, attorneys’ fees, and a $5,000 penalty per worker. However, a court may forego the penalty if it finds that employer was acting in good faith and reasonably believed it was not violating the law. The CDLE and Attorney General may also take administrative action to enforce the statute.
The new law applies to agreements entered into after August 10, 2022.
Senate Bill 22-161 (the “Wage Theft Employee Misclassification Enforcement” Act) substantially increases the enforcement mechanisms for wage claims. It increases the penalties for failing to pay wages to $1,000 or two times the unpaid wages, whichever is greater, and for willful violations to the greater of $3,000 or three times the unpaid wages. A prevailing employer can recover its attorneys’ fees only where the employer tenders the full amount of wages demanded by the employee within 14 days of the employee’s demand and the employee fails to recover a sum greater than the amount tendered. Like the prior law, employees may recover their attorneys’ fees if they prevail and recover more than the employer has tendered. The new law also increases the penalties for failing to comply with a request for production by the CDLE and expands the CDLE’s enforcement mechanisms. It also increases the penalties for retaliating against employees for exercising their rights under the Wage Claim Act.
House Bill 22-1112 changes the notice period for employees to notify the employer of a job-related injury from 4 days to 10 days and changes the notice employers are required to post in the workplace. House Bill 22-1354 provides certain protections regarding disclosure of mental health records relating to an injured worker making a workers comp claim.
Discrimination, Harassment and Retaliation CADA
House Bill 22-1367, in its original form (known as the “POWR” Bill), would have made sweeping changes to the law of discrimination, harassment, and retaliation under the Colorado Anti-Discrimination Act (“CADA”). However, during the session, the bill was substantially amended and limited. The law which passed expands the definition of “employee” to include individuals in domestic service. It extends the time limit to file a charge of discrimination from 180 days to 300 days after the alleged discrimination, which is consistent with the federal employment discrimination statutes. In addition, it expands the remedies for age discrimination claims to make them more consistent with other forms of discrimination.
As can be seen, this new legislation changes Colorado employment law in numerous important respects. Colorado employers should study these new laws carefully in consultation with employment counsel, and review their employment policies, practices and documents to ensure that they are in compliance.