Second Regular Session
Seventy-third General Assembly
STATE OF COLORADO
REVISED
This Version Includes All Amendments Adopted
on Second Reading in the Second House
LLS NO. 22-0956.01 Yelana Love x2295
HOUSE BILL 22-1317
House Committees Senate Committees
Judiciary Business, Labor, & Technology
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:
SENATE
Amended 2nd Reading
May 2, 2022
HOUSE
3rd Reading Unamended
April 18, 2022
HOUSE
Amended 2nd Reading
April 14, 2022
HOUSE SPONSORSHIP
Tipper, Bacon, Bernett, Duran, Exum, Garnett, Gonzales-Gutierrez, Jodeh, Lindsay,
Lontine, Sirota, Weissman, Woodrow
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 THIS SUBSECTION (2):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
(d) T
HIS SUBSECTION (2) DOES NOT APPLY TO A COVENANT NOT TO
25
SOLICIT CUSTOMERS GOVERNING A PERSON WHO , AT THE TIME THE26
COVENANT IS ENTERED INTO AND AT THE TIME IT IS ENFORCED , EARNS AN27
1317
-4- AMOUNT OF ANNUALIZED CASH COMPENSATION EQUIVALENT TO OR1
GREATER THAN SIXTY PERCENT OF THE THRESHOLD AMOUNT FOR HIGHLY2
COMPENSATED WORKERS IF THE NONSOLICITATION COVENANT IS NO3
BROADER THAN REASONABLY NECESSARY TO PROTECT THE EMPLOYER 'S4
LEGITIMATE INTEREST IN PROTECTING TRADE SECRETS .5
(3) T
HE FOLLOWING
COVENANTS ARE NOT PROHIBITED BY6
SUBSECTION (2) OF THIS SECTION:7
(a) A
PROVISION PROVIDING FOR AN EMPLOYER 'S RECOVERY OF8
THE EXPENSE OF EDUCATING AND TRAINING
A WORKER WHERE THE9
TRAINING IS DISTINCT FROM NORMAL, ON-THE-JOB TRAINING, THE10
EMPLOYER'S RECOVERY IS LIMITED TO THE REASONABLE COSTS OF THE11
TRAINING AND DECREASES OVER THE COURSE OF THE TWO YEARS12
SUBSEQUENT TO THE TRAINING PROPORTIONATELY BASED ON THE NUMBER13
OF MONTHS THAT HAVE PASSED SINCE THE COMPLETION OF THE TRAINING,14
AND THE EMPLOYER RECOVERING FOR THE COSTS OF THE TRAINING WOULD15
NOT VIOLATE THE "FAIR LABOR STANDARDS ACT OF 1938", 29 U.S.C. SEC.16
201 ET SEQ., OR ARTICLE 4 OF TITLE 8;17
(b) A
REASONABLE CONFIDENTIALITY PROVISION RELE VANT TO18
THE EMPLOYER'S BUSINESS THAT DOES NOT PROHIBIT DISCLOSURE OF19
INFORMATION THAT ARISES FROM THE
WORKER'S GENERAL TRAINING,20
KNOWLEDGE, SKILL, OR EXPERIENCE, WHETHER GAINED ON THE JOB OR21
OTHERWISE, INFORMATION THAT IS READILY ASCERTAINABLE TO THE22
PUBLIC, OR INFORMATION THAT A WORKER OTHERWISE HAS A RIGHT TO23
DISCLOSE AS LEGALLY PROTECTED CONDUCT ;24
(c) A COVENANT FOR THE PURCHASE AND SALE OF A BUSINESS OR25
THE ASSETS OF A BUSINESS; OR26
(d) A
PROVISION REQUIRING THE REPAYMENT OF A SCHOLARSHIP
27
1317
-5- PROVIDED TO AN INDIVIDUAL WORKING IN AN APPRENTICESHIP IF THE1
INDIVIDUAL FAILS TO COMPLY WITH THE CONDITIONS OF THE SCHOLARSHIP2
AGREEMENT.3
(4) (a) A
NY
COVENANT NOT TO COMPETE THAT IS OTHERWISE4
PERMISSIBLE UNDER SUBSECTION (2) OR (3) OF THIS SECTION IS VOID5
UNLESS NOTICE OF THE COVENANT NOT TO COMPETE AND THE TERMS6
OF THE COVENANT NOT TO COMPETE ARE PROVIDED TO :7
(I) A
PROSPECTIVE
WORKER BEFORE THE WORKER ACCEPTS THE8
EMPLOYER'S OFFER OF EMPLOYMENT; OR9
(II) A
CURRENT
WORKER AT LEAST FOURTEEN DAYS BEFORE THE10
EARLIER OF:11
(A) T
HE EFFECTIVE DATE OF THE
COVENANT; OR12
(B) T
HE EFFECTIVE DATE OF ANY ADDITIONAL COMPENSATION OR13
CHANGE IN THE TERMS OR CONDITIONS OF EMPLOYMENT THAT PROVIDES14
CONSIDERATION FOR THE
COVENANT.15
(b) A
N EMPLOYER SHALL PROVIDE THE NOTICE REQUIRED IN16
SUBSECTION (4)(a) OF THIS SECTION IN A SEPARATE DOCUMENT FROM ANY17
OTHER
COVENANTS BETWEEN THE WORKER AND EMPLOYER AND IN18
CLEAR AND CONSPICUOUS TERMS IN THE LANGUAGE IN WHICH THE19
WORKER AND EMPLOYER COMMUNICATE ABOUT THE WORKER'S20
PERFORMANCE. THE NOTICE MUST BE SIGNED BY THE WORKER.21
(c) (I) A WORKER MAY REQUEST AN ADDITIONAL COPY OF THE 22
COVENANT NOT TO COMPETE REQUIRED BY THIS SUBSECTION (4) ONCE23
EACH CALENDAR YEAR.24
(II) A
N EMPLOYER IS NOT REQUIRED UNDER THIS SUBSECTION (4)25
TO PROVIDE THE
WORKER WITH AN ADDITIONAL COPY OF THE 26
COVENANT NOT TO COMPETE MORE THAN ONCE DURING A CALENDAR27
1317
-6- YEAR.1
(d) AN EMPLOYER SATISFIES THE NOTICE REQUIREMENT OF THIS2
SUBSECTION (4) WHEN THE NOTICE:3
(I) IS PROVIDED WITH A COPY OF THE AGREEMENT CONTAINING THE4
COVENANT NOT TO COMPETE ;5
(II) IDENTIFIES THE AGREEMENT BY NAME AND STATES THAT THE6
AGREEMENT CONTAINS A COVENANT NOT TO COMPETE THAT COULD7
RESTRICT THE WORKERS' OPTIONS FOR SUBSEQUENT EMPLOYMENT8
FOLLOWING THEIR SEPARATION FROM THE EMPLOYER ; AND9
(III) DIRECTS THE WORKER TO THE SPECIFIC SECTIONS OR10
PARAGRAPHS OF THE AGREEMENT THAT CONTAIN THE COVENANT NOT TO11
COMPETE.12
(3) (a) (5) (a) Any covenant not to compete provision of an13
employment, partnership, or corporate agreement between physicians that14
restricts the right of a physician to practice medicine, as defined in section15
12-240-107, upon termination of the agreement, is void; except that all16
other provisions of the agreement enforceable at law, including17
provisions that require the payment of damages in an amount that is18
reasonably related to the injury suffered by reason of termination of the19
agreement, are enforceable. Provisions of a covenant not to compete that20
require the payment of damages upon termination of the agreement may21
include damages related to competition.22
(b) Notwithstanding subsection (3)(a) SUBSECTION (5)(a) of23
this section, after termination of an agreement described in subsection24
(3)(a) SUBSECTION (5)(a) of this section, a physician may disclose his or25
her continuing practice of medicine and new professional contact26
information to any patient with a rare disorder, as defined in accordance27
1317
-7- with criteria developed by the National Organization for Rare Disorders,1
Inc., or a successor organization, to whom the physician was providing2
consultation or treatment before termination of the agreement. Neither the3
physician nor the physician's employer, if any, is liable to any party to the4
prior agreement for damages alleged to have resulted from the disclosure5
or from the physician's treatment of the patient after termination of the6
prior agreement.7
(4) A person who violates this section commits a class 28
misdemeanor.9
(6) A COVENANT NOT TO COMPETE THAT APPLIES TO A WORKER10
WHO, AT THE TIME OF TERMINATION OF EMPLOYMENT PRIMARILY RESIDED11
OR WORKED IN COLORADO, MAY NOT REQUIRE THE WORKER TO12
ADJUDICATE THE ENFORCEABILITY OF THE COVENANT OUTSIDE OF13
COLORADO. NOTWITHSTANDING ANY CONTRACTUAL PROVISION TO THE14
CONTRARY, COLORADO LAW GOVERNS THE ENFORCEABILITY OF A15
COVENANT NOT TO COMPETE FOR A WORKER WHO AT THE TIME OF16
TERMINATION OF EMPLOYMENT PRIMARILY RESIDED AND WORKED IN17
COLORADO.18
(7) A WORKER WHO IS A PARTY TO A COVENANT NOT TO19
COMPETE, OR A SUBSEQUENT EMPLOYER THAT HAS HIRED OR IS20
CONSIDERING HIRING THE WORKER, MAY SEEK A DECLARATORY JUDGMENT21
FROM A COURT OF COMPETENT JURISDICTION OR AN ARBITRATOR THAT22
THE COVENANT NOT TO COMPETE IS UNENFORCEABLE .23
(8) (a) A
N EMPLOYER SHALL NOT ENTER INTO , PRESENT TO
A24
WORKER OR PROSPECTIVE WORKER AS A TERM OF EMPLOYMENT , OR25
ATTEMPT TO ENFORCE ANY COVENANT NOT TO COMPETE THAT IS VOID26
UNDER THIS SECTION.27
1317
-8- (b) AN EMPLOYER THAT VIOLATES SUBSECTION (8)(a) OF THIS1
SECTION IS LIABLE FOR ACTUAL DAMAGES AND A PENALTY OF FIVE2
THOUSAND DOLLARS PER WORKER OR PROSPECTIVE WORKER HARMED BY3
THE CONDUCT. THE ATTORNEY GENERAL AND ANY WORKER OR4
PROSPECTIVE WORKER HARMED BY AN EMPLOYER 'S CONDUCT MAY BRING5
AN ACTION FOR INJUNCTIVE RELIEF AND TO RECOVER PENALTIES . IN6
ADDITION TO INJUNCTIVE RELIEF AND THE PENALTY ALLOWED IN THIS7
SUBSECTION (8)(b), A WORKER OR PROSPECTIVE WORKER MAY RECOVER8
ACTUAL DAMAGES, REASONABLE COSTS, AND ATTORNEY FEES IN ANY9
PRIVATE ACTION BROUGHT UNDER THIS SECTION .10
(c) IN ANY ACTION BROUGHT UNDER THIS SUBSECTION (8), IF THE11
EMPLOYER SHOWS THAT THE ACT OR OMISSION GIVING RISE TO SUCH12
ACTION WAS IN GOOD FAITH AND THAT THE EMPLOYER HAD REASONABLE13
GROUNDS FOR BELIEVING THAT THE EMPLOYER'S ACT OR OMISSION WAS14
NOT A VIOLATION OF THIS SECTION, THE COURT MAY, IN ITS SOUND15
DISCRETION, AWARD THE WORKER OR WORKERS NO PENALTY OR AWARD16
A PENALTY OF ANY AMOUNT NOT TO EXCEED THE AMOUNT SPECIFIED IN17
SUBSECTION (8)(b) OF THIS SECTION.18
SECTION 3. Act subject to petition - effective date -19
applicability. (1) This act takes effect at 12:01 a.m. on the day following20
the expiration of the ninety-day period after final adjournment of the21
general assembly; except that, if a referendum petition is filed pursuant22
to section 1 (3) of article V of the state constitution against this act or an23
item, section, or part of this act within such period, then the act, item,24
section, or part will not take effect unless approved by the people at the25
general election to be held in November 2022 and, in such case, will take26
effect on the date of the official declaration of the vote thereon by the27
1317
-9- governor.1
(2) This act applies to covenants not to compete entered into2
or renewed on or after the applicable effective date of this act.3
1317
-10-