Second Regular Session
Seventy-third General Assembly
STATE OF COLORADO
ENGROSSED
This Version Includes All Amendments Adopted
on Second Reading in the House of Introduction
LLS NO. 22-0956.01 Yelana Love x2295
HOUSE BILL 22-1317
House Committees Senate Committees
Judiciary
A BILL FOR AN ACT
C
ONCERNING RESTRICTIVE EMPLOYMENT AGREEMENTS .101
Bill Summary
(Note: This summary applies to this bill as introduced and does
not reflect any amendments that may be subsequently adopted. If this bill
passes third reading in the house of introduction, a bill summary that
applies to the reengrossed version of this bill will be available at
http://leg.colorado.gov
.)
The bill declares that a restrictive employment agreement or
covenant not to compete that restricts the right of any person to receive
compensation for performance of labor for any employer is void, with
certain exceptions.
Additionally, if the employer provides proper notice of the
restrictive employment agreement or covenant not to compete to the
employee or prospective employee, the following agreements or
covenants are not prohibited:
HOUSE
Amended 2nd Reading
April 14, 2022
HOUSE SPONSORSHIP
Tipper,
SENATE SPONSORSHIP
Bridges,
Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment.
Capital letters or bold & italic numbers indicate new material to be added to existing statute.
Dashes through the words indicate deletions from existing statute. ! A provision providing for recovery of the expense of
educating and training an employee who has served an
employer for a period of less than 2 years, unless the
education and training was primarily for the benefit or
convenience of the employer;
! A reasonable confidentiality provision relevant to the
employer's business that does not prohibit disclosure of
information that arises from the employee's general
training, knowledge, skill, or experience, whether gained
on the job or otherwise, or information that is readily
ascertainable to the public; and
! Agreements or covenants with a person earning annual
cash compensation greater than the threshold amount for
highly compensated employees.
The bill limits choice of law and choice of venue provisions in
restrictive employment agreements and covenants not to compete.
The bill prohibits an employer from entering into, presenting to an
employee or prospective employee as a term of employment, or
attempting to enforce any restrictive employment agreement or covenant
not to compete that is void under the bill. An employer who violates this
provision is subject to a penalty of $5,000 for each employee or
prospective employee, injunctive relief, and actual damages.
Be it enacted by the General Assembly of the State of Colorado:1
SECTION 1. In Colorado Revised Statutes, amend 8-2-113 as2
follows:3
8-2-113. Unlawful to intimidate
worker - agreement not to4
compete - prohibition - exceptions - notice - definition. (1) Legislative5
intent. THE GENERAL ASSEMBLY INTENDS TO PRESERVE EXISTING STATE6
AND FEDERAL CASE LAW IN EFFECT BEFORE THE EFFECTIVE DATE OF THIS7
ACT THAT:8
(a) DEFINES WHAT COUNTS AS A COVENANT NOT TO COMPETE9
THAT IS PROHIBITED BY THIS SECTION; AND10
(b) SPECIFIES THE EXTENT TO WHICH A COVENANT NOT TO11
COMPETE FOR THE PROTECTION OF TRADE SECRETS MUST BE TAILORED IN12
SCOPE IN ORDER TO BE ENFORCEABLE UNDER THIS SECTION .13
1317-2- (1) (1.5) (a) It shall be IS unlawful to use force, threats, or other1
means of intimidation to prevent any person from engaging in any lawful2
occupation at any place he THE PERSON sees fit.3
(b) A
PERSON WHO VIOLATES THIS SUBSECTION
(1.5) COMMITS A4
CLASS 2 MISDEMEANOR, AS DEFINED IN SECTION 18-1.3-501.5
(2) (a) E
XCEPT AS PROVIDED IN SUBSECTIONS (2)(b) AND (3) OF6
THIS SECTION, any
covenant not to compete which THAT restricts the7
right of any person to receive compensation for performance of skilled or8
unskilled labor for any employer shall be IS void. but this subsection (2)9
shall not apply to:10
(b) THIS SUBSECTION (2) DOES NOT APPLY TO A COVENANT NOT TO11
COMPETE GOVERNING A PERSON WHO, AT THE TIME THE COVENANT NOT TO12
COMPETE IS ENTERED INTO AND AT THE TIME IT IS ENFORCED, EARNS AN13
AMOUNT OF ANNUALIZED CASH COMPENSATION EQUIVALENT TO OR14
GREATER THAN THE THRESHOLD AMOUNT FOR HIGHLY COMPENSATED15
WORKERS, IF THE COVENANT NOT TO COMPETE IS FOR THE PROTECTION OF16
TRADE SECRETS AND IS NO BROADER THAN IS REASONABLY NECESSARY TO17
PROTECT THE EMPLOYER'S LEGITIMATE INTEREST IN PROTECTING TRADE18
SECRETS.19
(a) Any contract for the purchase and sale of a business or the20
assets of a business;21
(b) Any contract for the protection of trade secrets;22
(c) AS USED IN SUBSECTION (2)(b) OF THIS SECTION:23
(I) "ANNUALIZED CASH COMPENSATION " MEANS: 24
(A) THE AMOUNT OF THE GROSS SALARY OR WAGE AMOUNT, THE25
FEE AMOUNT, OR THE OTHER COMPENSATION AMOUNT FOR THE FULL YEAR ,26
IF THE PERSON WAS EMPLOYED OR ENGAGED FOR A FULL YEAR .27
1317
-3- (B) THE COMPENSATION THAT THE PERSON WOULD HAVE EARNED,1
BASED ON THE WORKER'S GROSS SALARY OR WAGE AMOUNT, FEE, OR2
OTHER COMPENSATION IF THE WORKER WAS NOT EMPLOYED OR ENGAGED3
FOR A FULL YEAR. 4
(II) "THRESHOLD AMOUNT" FOR HIGHLY COMPENSATED WORKERS"5
MEANS THE GREATER OF THE THRESHOLD AMOUNT FOR HIGHLY6
COMPENSATED WORKERS AS DETERMINED BY THE DIVISION OF LABOR7
STANDARDS AND STATISTICS IN THE DEPARTMENT OF LABOR AND8
EMPLOYMENT:9
(A) A
S OF THE EFFECTIVE DATE OF THIS SECTION, AS AMENDED; OR10
(B) A
T THE TIME THE
COVENANT NOT TO COMPETE IS EXECUTED11
BY THE PARTIES.12
(c) Any contractual provision providing for recovery of the13
expense of educating and training an employee who has served an14
employer for a period of less than two years;15
(d) Executive and management personnel and officers and16
employees who constitute professional staff to executive and management17
personnel.18
(III) IN DETERMINING WHETHER A WORKER 'S CASH COMPENSATION19
EXCEEDS THE THRESHOLD AMOUNT, WHERE THE WORKER HAS BEEN20
EMPLOYED FOR LESS THAN A CALENDAR YEAR, THE WORKER'S CASH21
COMPENSATION EXCEEDS THE THRESHOLD AMOUNT IF THE WORKER22
WOULD REASONABLY EXPECT TO EARN MORE THAN THE THRESHOLD23
AMOUNT DURING A CALENDAR YEAR OF EMPLOYMENT .24
(3) T
HE FOLLOWING
COVENANTS ARE NOT PROHIBITED BY25
SUBSECTION (2) OF THIS SECTION:26
(a) A
PROVISION PROVIDING FOR AN EMPLOYER 'S RECOVERY OF27
1317
-4- THE EXPENSE OF EDUCATING AND TRAINING A WORKER WHO HAS SERVED1
AN EMPLOYER FOR A PERIOD OF LESS THAN TWO YEARS, WHERE THE2
TRAINING IS DISTINCT FROM NORMAL, ON-THE-JOB TRAINING, THE3
EMPLOYER'S RECOVERY IS LIMITED TO THE REASONABLE COSTS OF THE4
TRAINING AND DECREASES OVER THE COURSE OF THE TWO YEARS5
SUBSEQUENT TO THE TRAINING PROPORTIONATELY BASED ON THE NUMBER6
OF MONTHS THAT HAVE PASSED SINCE THE COMPLETION OF THE TRAINING,7
AND THE EMPLOYER RECOVERING FOR THE COSTS OF THE TRAINING WOULD8
NOT VIOLATE THE "FAIR LABOR STANDARDS ACT OF 1938", 29 U.S.C. SEC.9
201 ET SEQ., OR ARTICLE 4 OF TITLE 8;10
(b) A
REASONABLE CONFIDENTIALITY PROVISION RELEVANT TO11
THE EMPLOYER'S BUSINESS THAT DOES NOT PROHIBIT DISCLOSURE OF12
INFORMATION THAT ARISES FROM THE
WORKER'S GENERAL TRAINING,13
KNOWLEDGE, SKILL, OR EXPERIENCE, WHETHER GAINED ON THE JOB OR14
OTHERWISE, INFORMATION THAT IS READILY ASCERTAINABLE TO THE15
PUBLIC, OR INFORMATION THAT A WORKER OTHERWISE HAS A RIGHT TO16
DISCLOSE AS LEGALLY PROTECTED CONDUCT ;17
(c) A COVENANT FOR THE PURCHASE AND SALE OF A BUSINESS OR18
THE ASSETS OF A BUSINESS.19
(4) (a) A
NY
COVENANT NOT TO COMPETE THAT IS OTHERWISE20
PERMISSIBLE UNDER SUBSECTION (2) OR (3) OF THIS SECTION IS VOID21
UNLESS NOTICE OF THE COVENANT NOT TO COMPETE AND THE TERMS22
OF THE COVENANT NOT TO COMPETE ARE PROVIDED TO :23
(I) A
PROSPECTIVE
WORKER BEFORE THE WORKER ACCEPTS THE24
EMPLOYER'S OFFER OF EMPLOYMENT; OR25
(II) A
CURRENT
WORKER AT LEAST FOURTEEN DAYS BEFORE THE26
EARLIER OF:27
1317
-5- (A) THE EFFECTIVE DATE OF THE COVENANT; OR1
(B) T
HE EFFECTIVE DATE OF ANY ADDITIONAL COMPENSATION OR2
CHANGE IN THE TERMS OR CONDITIONS OF EMPLOYMENT THAT PROVIDES3
CONSIDERATION FOR THE
COVENANT.4
(b) A
N EMPLOYER SHALL PROVIDE THE NOTICE REQUIRED IN5
SUBSECTION (4)(a) OF THIS SECTION IN A SEPARATE DOCUMENT FROM ANY6
OTHER
COVENANTS BETWEEN THE WORKER AND EMPLOYER AND IN7
CLEAR AND CONSPICUOUS TERMS IN THE LANGUAGE IN WHICH THE8
WORKER AND EMPLOYER COMMUNICATE ABOUT THE WORKER'S9
PERFORMANCE. THE NOTICE MUST BE SIGNED BY THE WORKER.10
(c) (I) A WORKER MAY REQUEST AN ADDITIONAL COPY OF THE 11
COVENANT NOT TO COMPETE REQUIRED BY THIS SUBSECTION (4) ONCE12
EACH CALENDAR YEAR.13
(II) A
N EMPLOYER IS NOT REQUIRED UNDER THIS SUBSECTION (4)14
TO PROVIDE THE
WORKER WITH AN ADDITIONAL COPY OF THE 15
COVENANT NOT TO COMPETE MORE THAN ONCE DURING A CALENDAR16
YEAR.17
(d) AN EMPLOYER SATISFIES THE NOTICE REQUIREMENT OF THIS18
SUBSECTION (4) WHEN THE NOTICE:19
(I) IS PROVIDED WITH A COPY OF THE AGREEMENT CONTAINING THE20
COVENANT NOT TO COMPETE ;21
(II) IDENTIFIES THE AGREEMENT BY NAME AND STATES THAT THE22
AGREEMENT CONTAINS A COVENANT NOT TO COMPETE THAT COULD23
RESTRICT THE WORKERS ' OPTIONS FOR SUBSEQUENT EMPLOYMENT24
FOLLOWING THEIR SEPARATION FROM THE EMPLOYER ; AND25
(III) DIRECTS THE WORKER TO THE SPECIFIC SECTIONS OR26
PARAGRAPHS OF THE AGREEMENT THAT CONTAIN THE COVENANT NOT TO27
1317
-6- COMPETE.1
(3) (a) (5) (a) Any covenant not to compete provision of an2
employment, partnership, or corporate agreement between physicians that3
restricts the right of a physician to practice medicine, as defined in section4
12-240-107, upon termination of the agreement, is void; except that all5
other provisions of the agreement enforceable at law, including6
provisions that require the payment of damages in an amount that is7
reasonably related to the injury suffered by reason of termination of the8
agreement, are enforceable. Provisions of a covenant not to compete that9
require the payment of damages upon termination of the agreement may10
include damages related to competition.11
(b) Notwithstanding subsection (3)(a) SUBSECTION (5)(a) of12
this section, after termination of an agreement described in subsection13
(3)(a) SUBSECTION (5)(a) of this section, a physician may disclose his or14
her continuing practice of medicine and new professional contact15
information to any patient with a rare disorder, as defined in accordance16
with criteria developed by the National Organization for Rare Disorders,17
Inc., or a successor organization, to whom the physician was providing18
consultation or treatment before termination of the agreement. Neither the19
physician nor the physician's employer, if any, is liable to any party to the20
prior agreement for damages alleged to have resulted from the disclosure21
or from the physician's treatment of the patient after termination of the22
prior agreement.23
(4) A person who violates this section commits a class 224
misdemeanor.25
(6) A COVENANT NOT TO COMPETE THAT APPLIES TO A WORKER26
WHO, AT THE TIME OF TERMINATION OF EMPLOYMENT PRIMARILY RESIDED27
1317
-7- OR WORKED IN COLORADO, MAY NOT REQUIRE THE WORKER TO1
ADJUDICATE THE ENFORCEABILITY OF THE COVENANT OUTSIDE OF2
COLORADO. NOTWITHSTANDING ANY CONTRACTUAL PROVISION TO THE3
CONTRARY, COLORADO LAW GOVERNS THE ENFORCEABILITY OF A4
COVENANT NOT TO COMPETE FOR A WORKER WHO AT THE TIME OF5
TERMINATION OF EMPLOYMENT PRIMARILY RESIDED AND WORKED IN6
COLORADO.7
(7) A WORKER WHO IS A PARTY TO A COVENANT NOT TO8
COMPETE, OR A SUBSEQUENT EMPLOYER THAT HAS HIRED OR IS9
CONSIDERING HIRING THE WORKER, MAY SEEK A DECLARATORY JUDGMENT10
FROM A COURT OF COMPETENT JURISDICTION OR AN ARBITRATOR THAT11
THE COVENANT NOT TO COMPETE IS UNENFORCEABLE .12
(8) (a) A
N EMPLOYER SHALL NOT ENTER INTO , PRESENT TO
A13
WORKER OR PROSPECTIVE WORKER AS A TERM OF EMPLOYMENT , OR14
ATTEMPT TO ENFORCE ANY COVENANT NOT TO COMPETE THAT IS VOID15
UNDER THIS SECTION.16
(b) A
N EMPLOYER THAT VIOLATES SUBSECTION (8)(a) OF THIS17
SECTION IS LIABLE FOR ACTUAL DAMAGES AND A PENALTY OF FIVE18
THOUSAND DOLLARS PER
WORKER OR PROSPECTIVE WORKER HARMED BY19
THE CONDUCT. THE ATTORNEY GENERAL AND ANY EMPLOYEE OR20
PROSPECTIVE WORKER HARMED BY AN EMPLOYER 'S CONDUCT MAY BRING21
AN ACTION FOR INJUNCTIVE RELIEF AND TO RECOVER PENALTIES . IN22
ADDITION TO INJUNCTIVE RELIEF AND THE PENALTY ALLOWED IN THIS23
SUBSECTION (8)(b), A WORKER OR PROSPECTIVE WORKER MAY RECOVER 24
ACTUAL DAMAGES, REASONABLE COSTS, AND ATTORNEY FEES IN ANY25
PRIVATE ACTION BROUGHT UNDER THIS SECTION .26
(c) IN ANY ACTION BROUGHT UNDER THIS SUBSECTION (8), IF THE27
1317
-8- EMPLOYER SHOWS THAT THE ACT OR OMISSION GIVING RISE TO SUCH1
ACTION WAS IN GOOD FAITH AND THAT THE EMPLOYER HAD REASONABLE2
GROUNDS FOR BELIEVING THAT THE EMPLOYER'S ACT OR OMISSION WAS3
NOT A VIOLATION OF THIS SECTION, THE COURT MAY, IN ITS SOUND4
DISCRETION, AWARD THE WORKER OR WORKERS NO PENALTY OR AWARD5
A PENALTY OF ANY AMOUNT NOT TO EXCEED THE AMOUNT SPECIFIED IN6
SUBSECTION (8)(b) OF THIS SECTION.7
SECTION 3. Act subject to petition - effective date -8
applicability. (1) This act takes effect at 12:01 a.m. on the day following9
the expiration of the ninety-day period after final adjournment of the10
general assembly; except that, if a referendum petition is filed pursuant11
to section 1 (3) of article V of the state constitution against this act or an12
item, section, or part of this act within such period, then the act, item,13
section, or part will not take effect unless approved by the people at the14
general election to be held in November 2022 and, in such case, will take15
effect on the date of the official declaration of the vote thereon by the16
governor.17
(2) This act applies to covenants not to compete entered into18
or renewed on or after the applicable effective date of this act.19
1317
-9-