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January 20, 2022

Rethinking Restrictive Agreements in Colorado

New legislation taking effect March 1, 2022 will see stricter enforcement of Colorado’s public policy against restrictive covenants. Colorado’s SB21-271 will impact enforcement efforts for violations of C.R.S. Section 8-2-113. Existing law under C.R.S. §8-2-113 voids certain restrictive agreements such as noncompete and nonsolicitation agreements unless certain exceptions apply[i]. SB21-271 elevates any violation of C.R.S. §8-2-113 to a class 2 misdemeanor; punishable by up to 120 days in jail, a fine of up to $750, or both.

With little to no guidance on how this new enforcement tool will be used, or what constitutes a violation of the new bill, employers should be mindful that any number of actions associated with a restrictive agreement (e.g., requiring an employee to sign, attempting and/or threatening to enforce) could cause potential liability for violating the new statute. Before SB21-271 becomes effective, employers should review existing restrictive agreements to assure compliance with exceptions under C.R.S. §8-2-113.  

Members with questions about restrictive covenants should contact Western Growers.

[i] Exceptions exist for a) purchase or sale of a business or its assets; b) protection of trade secrets; c) recovery of education or training expenses against employees with two or less years of employment; d) restriction on executive or management staff or personnel.