The enforceability of non-compete, non-solicitation, non-disclosure, and other restrictive covenants has become a hot topic in Colorado’s business community, especially in light of recently amended state law and the Federal Trade Commission’s recent efforts to ban such restrictions. There are limited circumstances under which restrictive covenants are permitted under state law and several key considerations regarding their enforceability.
Historically, broad restrictive covenants have been disfavored in Colorado. The statute regulating these agreements (C.R.S. § 8-2-113) was amended in 2022 to add further restrictions, making non-compete and related agreements extremely difficult to enforce in Colorado. Because the amendments are relatively recent, the finer points have not yet been tested in court.
In Colorado, restrictive covenants are generally permitted as follows:
Protection of Trade Secrets. A non-compete agreement for the purpose of protecting trade secrets can only be enforced against highly compensated workers. Trade secrets are defined to include technical information or formulas, as well as certain customer lists and specified confidential business or financial information. A highly compensated employee is defined as a person who is paid an annual salary of $127,091 in 2025, a threshold which will be increased by the Colorado Division of Labor and Employment each year. Non-compete agreements must be tailored to restrict competition only as reasonably necessary to protect trade secrets.
Non-Solicitation of Customers. Agreements that restrict an employee from soliciting the employer’s customers post-termination are enforceable only against employees who earn at least sixty percent (60%) of the threshold for highly compensated employees.
Non-Disclosure Agreements. A non-disclosure agreement that concerns the confidentiality of business information is permissible post-termination of employment so long as the agreement does not prohibit the disclosure of information that arises from an employee’s general training, knowledge, skill, or experience. When properly drafted, non-disclosure agreements can be enforced against any former employee, regardless of the person’s level of compensation.
Purchase and Sale of a Business. It remains permissible under Colorado law to enter into restrictive covenants in connection with the purchase and sale of a business or an interest in a business. Restrictions relating to this prong of the statute must be reasonable and can relate to both non-competition and non-solicitation of customers.
Education and Training Expenses. Agreements to recover an employee’s education and training expenses are limited, and do not include the costs of normal on-the-job training. Because this aspect of the law was further revised in 2024, the Attorney General now has authority to promulgate more detailed rules concerning this type of agreement and to seek significant recovery against employers who violate the rule.
Repayment of Apprenticeship Scholarships. Agreements concerning the recovery of costs associated with scholarships provided to an individual working in an apprenticeship can be enforceable if the individual fails to comply with the conditions of the scholarship agreement. These types of agreements do not sound like non-compete agreements, but they are treated similarly under Colorado law because of the potential impact on an employee’s ability to terminate employment and work for a competitor.
Colorado’s statute also includes certain carveouts for physicians and permits the grandfathering of certain restrictive covenants drafted and signed prior to 2022.
To be enforceable, a restrictive covenant in Colorado must fit into one of the permitted categories and comply with the statute’s notice requirements (generally 14 days’ advance notice in clear, concise phrasing). The statute has teeth, too, allowing courts to impose penalties (up to $5,000) and award damages and attorneys’ fees against those businesses entering into or attempting to enforce a faulty agreement.
Restrictive covenants can be valuable business tools, but only if they are enforceable and therefore carefully drafted. Proper counseling and drafting tailored to the specific situation are essential to reduce risks and increase the likelihood of enforcement.
While this post identifies the general situations where restrictive covenants can be used, it is not intended as legal advice. Please reach out to our employment law team with questions:
Erin Leach, Nick Ricotta, or Josh Wolff.
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