Summary of Colorado Non-Compete Law (“Don’t Try this at Home Kids!”)
July 29, 2026
By: Colin A. Walker
One of the most controversial and highly litigated employment issues in the country are non-compete agreements and non-solicitation agreements. Many employers feel that these agreements are necessary to protect the substantial investments they make in such things as R&D, client development, and recruiting. Many employees view them as anticompetitive and unduly restrictive of their ability to earn a living through their labor. Unlike many employment issues, this one does not only pit employers against employees. There is a third interested party when there is a non-compete: the other employer who would like to hire the employee. It, too, may view the non-compete as inappropriately interfering with its ability to do business. Not surprisingly, these competing interests have resulted in case law and statutes which vary wildly from jurisdiction to jurisdiction. Colorado has one of the more restrictive laws, and this is further complicated by the fact that the law was amended several times since 2022 to make it significantly more difficult to enforce non-compete and non-solicitation of customer agreement, or what the Colorado statute calls, “covenants-not-to-compete.”
Prior to August 10, 2022, the Colorado statute on non-compete agreements provided that covenants-not-to-compete were void with four exceptions:
- A contract for the purchase and sale of a business or the assets of a business;
- A contract for the protection of trade secrets;
- A contractual provision providing for recovery of the expense of educating and training an employee who has served an employer for a period of less than two years;
- A contract applicable to executive and management personnel and officers and employees who constitute professional staff to executive and management personnel.
In addition, the covenant had to be reasonable in terms of the scope of the restriction, the geography, and time period of the restriction. This law still applies to covenants-not-to-compete which were entered into prior to August 10, 2022,
However, the law was amended, effective August 10, 2022. It was amended again in 2023, again in 2024, and yet again in 2025. Like the previous law, the new law provides that covenants-not-to-compete are void with exceptions, but the exceptions are different and there are certain other requirements, which, if not followed, will cause the restriction to be void, and subject the employer to an action by the worker or, in some cases, the Attorney General, for penalties, damages and attorneys’ fees. The exceptions are:
- A restriction for the protection of trade secrets which is no broader than is reasonably necessary to protect the legitimate interest in protecting trade secrets;
- Provisions for the recovery of the expense of educating and training a worker;
- Restrictions related to the purchase and sale of a business or the assets of a business;
- Reasonable confidentiality agreements;
- Provisions requiring the repayment of a scholarship provided to an individual working in an apprenticeship if the individual fails to comply with the conditions of the scholarship agreement are permissible as long as they comply with the applicable requirements of the law.
In 2024, the statute was amended to make the training expenses provision (known by the acronym “TRAPS” - Training Repayment Agreement Provisions) more stringent and to provide for recovery of three times the training expenses for a violation. See June 3, 2024 blog post (“Colorado Amends Non-Compete Law Regarding Training Repayment Agreement Provisions (TRAPS)”).
In 2025, the statute was amended to remove the practice of medicine, the advanced practice of nursing and the practice of dentistry from the trade secret exception. In other words, covenants-not-to-compete against those professionals are void even if they comply with the trade secret exception.
Also in 2025, the purchase and sale of a business exception was amended to limit the duration of a restriction applicable to a minority owner of a business who received the interest in exchange for services by a formula by which the consideration received by the minority owner for their ownership interest is divided by the annualized cash compensation received by the minority over the previous two years.
Falling within one or more of the above exceptions, however, is not necessarily enough to make a covenant-not-to-compete enforceable. For covenants-not-to-compete based on the protection of trade secrets, the law has compensation thresholds below which the restrictions are not enforceable. For a non-compete agreement for the protection of trade secrets, the worker must earn, at the time the covenant not to compete is entered into and at the time it is enforced, “annualized compensation” of at least the threshold amount for highly-compensated workers under the Colorado PAY CALC Order. In 2026, that amount is $130,014. It will go up each year. If the employee does not earn at least this much, the non-compete will be void. For a non-solicitation of customer agreement to be enforceable, the employee must earn, at the time the covenant not to compete is entered into and at the time it is enforced, annualized compensation which is more than 60% of the threshold amount for highly-compensated workers under the Colorado PAY CALC Order. In 2026, that amount is $78,008.40. Again, if the employee does not earn at least this much, the non-solicitation agreement will be void. The law does not apply to non-solicitation of employees.
Determining annualize cash compensation can be complicated where commissions and bonuses are involved. The statute provides: “Annualized cash compensation” means:
(A) The amount of the gross salary or wage amount, the fee amount, or the other compensation amount for the full year, if the person was employed or engaged for a full year;
(B) The compensation that the person would have earned, based on the worker’s gross salary or wage amount, fee, or other compensation if the worker was not employed or engaged for a full year.
Where the worker has been employed for less than a calendar year, the worker’s cash compensation exceeds the threshold amount if the worker would reasonably expect to earn more than the threshold amount during a calendar year of employment.
In addition, the employer must give the worker written notice prior to signing the agreement as follows:
- Current employees: At least 14 days before the earlier of:
- The effective date of the agreement, or
- The effective date of any additional compensation or change in the terms or conditions of employment that provides consideration for the agreement.
- Prospective employees: Before the employee accepts the offer of employment.
The notice must be:
- In a separate document from any other covenants between the worker and employer;
- In clear and conspicuous terms;
- In the language in which the employee and the employer communicate;
- Signed by the employee.
The statute provides that the notice is sufficient if:
- It is provided with a copy of the agreement;
- Identifies the agreement by name and states that the agreement contains a covenant not to compete that could restrict the employee’s options for subsequent employment following separation; and
- Directs the employee to the specific sections or paragraphs of the agreement that contains the covenant.
And, it would have to be signed by the employee. A cover letter which attaches the proposed agreement is one way to do this. But, the notice cannot include any other terms or conditions of employment. If the employer fails to give proper notice, the covenant will be void.
Like the previous law, under the new law, covenants-not-to-compete must be reasonable in scope, geography, and duration.
Choice of law and venue provisions which require application of law other than Colorado’s or venue in another state for employees working primarily in Colorado are void under the new law.
The law may be enforced by the Attorney General and an aggrieved employee can bring a private right of action, which includes a $5,000 penalty, plus damages, plus costs and attorneys’ fees. The penalty applies for merely presenting a non-compliant covenant-not-to-compete to a worker.
Needless to say, the law of covenants-not-to-compete in Colorado is complicated and the stakes are high. Even presenting a covenant which does not comply with the law to an employee can result in penalties, attorneys’ fees, and potentially damages. The employer cannot simply withdraw the request to avoid liability. The laws governing covenants-not-to-compete in many other states are also complicated. Employers wishing to have their employees sign covenants-not-to-compete should consult with competent employment counsel.