Under Colorado noncompete law, a covenant not to compete is void by default and enforceable only in narrow circumstances. The agreement sticks only when the worker earns at or above the state’s highly compensated worker threshold (set at $130,014 for 2026), the restriction exists to protect trade secrets, it is no broader than reasonably necessary, and the employer followed strict written notice rules. Miss any one of those and the noncompete is dead, and since August 10, 2022, the employer who tried to use it can be on the hook for a $5,000-per-worker penalty plus actual damages and attorney fees.
The Starting Point Is Void
C.R.S. 8-2-113 says any covenant that restricts a person’s right to earn a living from any employer is void.1Justia. Colorado Code 8-2-113 – Unlawful to Intimidate Worker – Agreement Not to Compete – Prohibition – Exceptions – Notice – Rules – Definitions There is no balancing test. The agreement is void unless it fits one of the statutory exceptions, and an employer cannot save a noncompliant clause by arguing the terms were reasonable or that the worker signed voluntarily.
Before the 2022 amendments in HB22-1317, the exceptions turned on job titles like “executive and management personnel.”2Colorado General Assembly. HB22-1317 Restrictive Employment Agreements That framework is gone. The current test is driven by compensation, purpose, and scope.
When a Noncompete Is Enforceable
A noncompete can be enforced only when all three of these conditions are met at the same time.
- Compensation threshold. The worker must earn annualized cash compensation at or above the highly compensated worker (HCW) threshold set each year by the Colorado Department of Labor and Employment. For 2026 the number is $130,014. The worker has to clear the threshold both when the agreement is signed and when the employer tries to enforce it.3Colorado Department of Labor and Employment. 2026 PAY CALC Order 7 CCR 1103-14
- Trade secret purpose. The restriction must exist to protect trade secrets. A general desire to keep former employees out of the market does not qualify.
- No broader than necessary. The geographic area, duration, and subject matter cannot go beyond what is reasonably needed to protect those trade secrets.1Justia. Colorado Code 8-2-113 – Unlawful to Intimidate Worker – Agreement Not to Compete – Prohibition – Exceptions – Notice – Rules – Definitions
Missing any one of the three voids the agreement. A worker earning $200,000 who signs a noncompete that has nothing to do with trade secrets still has a void covenant. And because the HCW threshold adjusts each year, an agreement enforceable in one year may slip out of range the next if the worker’s pay does not keep up.
Nonsolicitation Agreements Use a Lower Threshold
Colorado treats nonsolicitation covenants, which restrict a former employee from reaching out to the employer’s customers, as a separate category with a lower bar. The compensation floor for a nonsolicitation agreement is 60% of the HCW threshold, which works out to $78,008.40 for 2026.1Justia. Colorado Code 8-2-113 – Unlawful to Intimidate Worker – Agreement Not to Compete – Prohibition – Exceptions – Notice – Rules – Definitions The trade secret purpose and reasonable-scope requirements still apply.
Using the wrong threshold is a common mistake. An employer who imposes a full noncompete on someone earning $80,000, thinking the 60% figure covers it, ends up with a void agreement and the same exposure to penalties as any other illegal noncompete.
Agreements That Skip the Salary Threshold
A few categories of restrictive covenants sit outside the HCW framework. These can apply regardless of what the worker earns, but each has its own conditions.
Sale of a Business
When a business, an ownership interest, or substantially all of a business’s assets are sold, the seller can agree not to compete with the buyer. For minority owners who received their stake as equity compensation tied to their work, the duration is capped by a formula: total sale consideration divided by the individual’s average annualized compensation over the preceding two years (or their full tenure, if shorter).1Justia. Colorado Code 8-2-113 – Unlawful to Intimidate Worker – Agreement Not to Compete – Prohibition – Exceptions – Notice – Rules – Definitions That formula keeps employers from locking low-equity workers into disproportionately long restrictions.
Training Expense Recovery
Employers can require repayment of training costs when the training is distinct from normal on-the-job instruction. The repayment is capped at reasonable costs and must decline proportionally over the two years after training, so a worker who leaves one year out owes roughly half.1Justia. Colorado Code 8-2-113 – Unlawful to Intimidate Worker – Agreement Not to Compete – Prohibition – Exceptions – Notice – Rules – Definitions Public employers get a longer window. The repayment also cannot violate federal wage law or Colorado wage protections, which rules out deductions that would push effective pay below minimum wage.
Confidentiality Clauses
Nondisclosure provisions are a separate category and do not need to clear the HCW threshold. But a confidentiality clause cannot prohibit a worker from disclosing information that is readily available to the public, information the worker has a legal right to disclose (such as safety concerns or wage information), or the worker’s general knowledge, training, and skills gained on the job. A confidentiality clause that reaches into those areas risks being treated as an unlawful restraint on employment rather than a legitimate trade secret protection.
Notice Requirements
Even an otherwise valid noncompete dies if the employer botches notice. This is where many agreements fall apart.
For a prospective employee, the employer must deliver notice of the noncompete and its terms before the worker accepts the offer. For a current employee, the notice has to arrive at least fourteen days before the covenant takes effect or before the worker receives any additional compensation that serves as consideration.1Justia. Colorado Code 8-2-113 – Unlawful to Intimidate Worker – Agreement Not to Compete – Prohibition – Exceptions – Notice – Rules – Definitions
The notice itself has to meet several format rules:
- It must be a separate document from other covenants between the worker and employer.
- It must be clear and conspicuous, written in the language the employer and worker actually use for job communications.
- It must identify the agreement by name, state that it contains a noncompete that could restrict future employment, and point to the exact sections containing the restriction.
- The worker must sign it.1Justia. Colorado Code 8-2-113 – Unlawful to Intimidate Worker – Agreement Not to Compete – Prohibition – Exceptions – Notice – Rules – Definitions
Any failure here voids the noncompete, even when every other statutory condition is met. A noncompete buried on page fourteen of an employment handbook, or handed over on a worker’s first day with no advance warning, will not hold up.
What a Worker Can Recover
Before 2022, voiding the agreement was essentially the only remedy. The employer bore no real cost for using an illegal noncompete, and the worker carried all the litigation risk. The amendments rebalanced that.
An employer who enters into, presents, or attempts to enforce a void noncompete is liable for a penalty of $5,000 per worker or prospective worker harmed, plus actual damages. A worker who sues can also recover reasonable costs and attorney fees.1Justia. Colorado Code 8-2-113 – Unlawful to Intimidate Worker – Agreement Not to Compete – Prohibition – Exceptions – Notice – Rules – Definitions The attorney general can bring enforcement actions and seek injunctive relief, and for training repayment violations specifically can recover three times the amount the employer tried to collect.
Employers have one safety valve. If the employer shows the violation was committed in good faith and that it had reasonable grounds to believe its conduct was lawful, the court can reduce or eliminate the $5,000 penalty.1Justia. Colorado Code 8-2-113 – Unlawful to Intimidate Worker – Agreement Not to Compete – Prohibition – Exceptions – Notice – Rules – Definitions That is discretionary. Actual damages and attorney fees are still available.
Overbroad Agreements and Blue Penciling
When a noncompete clears the salary and purpose tests but reaches too far geographically or lasts too long, the question is whether a court will narrow it or strike it down.
Colorado courts have discretion to blue pencil a restrictive covenant by trimming its geographic scope, duration, or subject matter. But that is discretion, not an obligation. Courts have said they are not required to rewrite a poorly drafted agreement, and declining to do so is not an abuse of discretion. The employer bears the burden of drafting a lawful covenant in the first place. An employer who writes an aggressive restriction expecting judicial repair can lose the whole thing.
Geographic scope is evaluated case by case. The restriction should track the employer’s actual competitive footprint and the worker’s role. A short radius around a store the worker managed looks very different from a multistate industry-wide ban. Duration faces similar scrutiny. Restrictions stretching beyond one or two years draw more skepticism, and the employer has to justify why the longer window is necessary to protect trade secrets. A six-month restriction tied to a specific client list is easier to defend than a three-year ban on an entire line of work.
Where Federal Law Stands
For a stretch in 2024 it looked as though federal law might displace state noncompete rules. The Federal Trade Commission issued a final rule in April 2024 that would have banned most noncompetes nationwide. A federal court in Texas blocked it, finding the FTC lacked authority for a regulation that sweeping. In September 2025 the FTC formally abandoned its appeal and accepted the rule’s vacatur.4Federal Trade Commission. Federal Trade Commission Files to Accede to Vacatur of Non-Compete Clause Rule The agency has shifted to case-by-case enforcement under existing antitrust authority.
For now, Colorado’s statute is the governing framework for anyone working or hiring in the state, and it will remain so for the foreseeable future.