Colorado Restrictive Covenant Law: Thresholds, Notice, and Penalties

Under Colorado non-compete law, most agreements that restrict where you can work after leaving a job are void from the moment they’re signed. The governing statute, CRS § 8-2-113, allows a non-compete only if you earn at least $130,014 per year (the 2026 threshold), the agreement exists to protect trade secrets, and it is no broader than necessary to do that.¹ Employers who present or try to enforce agreements outside those limits owe $5,000 per affected worker, plus damages and attorney fees.

Void by Default

Colorado’s starting rule is blunt. Any agreement restricting a person’s ability to earn a living from any employer is void unless it fits within one of the statute’s narrow exceptions.¹ The employer carries the burden of proving the exception applies. That makes Colorado one of the more employee-protective states on restrictive covenants, and it means employers using templates borrowed from other states routinely end up with agreements that don’t hold up.

A 2022 overhaul (HB 22-1317) set the current framework. A 2025 update (SB 25-083) tightened it further, especially for healthcare providers and minority business owners.²

Who the Rules Reach: Salary Thresholds by Covenant Type

The first question for any Colorado worker is what type of clause you signed and whether your pay clears the bar the statute sets for that clause. The thresholds are set annually by the Division of Labor Standards and Statistics.

Non-Compete Agreements

A non-compete bars you from working for a competitor or starting a competing business. It is enforceable only if you earn at least $130,014 in annualized cash compensation for 2026.³ You have to meet the threshold both when you signed and when your employer tries to enforce. If your pay drops below the number before enforcement, the non-compete is void.¹

Non-Solicitation Agreements

Non-solicitation clauses stop you from contacting your former employer’s customers. The pay bar is lower: 60% of the highly compensated threshold, which comes to $78,008.40 for 2026.¹ Courts more readily uphold non-solicitations than full non-competes because they restrict a narrower slice of activity, but clauses that sweep in customers you never actually worked with remain vulnerable.

Confidentiality and NDAs

Confidentiality agreements have no salary threshold and apply at every pay level. They must be reasonable and tied to the employer’s business. Colorado draws hard lines on what an NDA cannot restrict: your general training, knowledge, and skills; information that is publicly available; and anything you have a legal right to disclose, including workplace safety concerns and wage information.¹

Training Repayment Provisions

Repayment clauses that make you pay back training costs if you leave early are allowed only when the training is distinct from ordinary on-the-job training, the amount is limited to reasonable costs, and the obligation decreases proportionally over two years from the date training was completed.⁴ An employer cannot charge the full cost of a certification course 18 months after you finished it. The number must shrink month by month.

Trade Secrets and No Broader Than Necessary

Clearing the salary threshold is not enough. A non-compete must exist to protect trade secrets, and it must be no broader than reasonably necessary to do that. A blanket bar on working anywhere in your industry will almost certainly fail. So will indefinite durations and sweeping geographic scopes. If the real purpose is to suppress competition rather than protect specific proprietary information, courts treat the agreement as void.

Notice, Timing, and Consideration

Colorado voids agreements that skip the required procedural steps, even when the substance would otherwise pass.

For a new hire, the employer must give you the restrictive covenant before you accept the offer. For an existing employee being asked to sign a new covenant, the employer must deliver written notice at least 14 days before the agreement takes effect or before any change in employment conditions that serves as consideration. A non-compete slipped into a handbook update does not meet this requirement.

Consideration matters too. If your employer introduces a covenant after you already started, continued employment alone is not enough to make it binding. Something additional has to change hands: a raise, a bonus, a promotion. Without that, the agreement is unenforceable.¹

Out-of-State Employers Cannot Pull You Into Another State’s Courts

If your agreement picks another state’s law or another state’s courts, Colorado overrides that clause for Colorado-based workers. A national employer headquartered elsewhere cannot force you into its home courts to litigate a non-compete you signed while working in Colorado. You can file a declaratory judgment action in Colorado to invalidate the provision, and if you win, the employer may owe your attorney fees and statutory penalties.¹

Healthcare Providers Are Now Effectively Exempt

SB 25-083 removed physicians, advanced practice registered nurses, and dentists from the highly compensated worker exemption entirely. Non-competes restricting the practice of medicine, nursing, or dentistry in Colorado are void regardless of the provider’s salary.²

The same law bars agreements that stop a provider from telling patients the provider is leaving, sharing new contact information, or informing patients of their right to choose any provider. Employers can still require a departing physician to pay damages for soliciting patients, but the patient’s right to follow their provider is protected no matter what the contract says.²

Sale of a Business Is Treated Differently

If you sold a business and signed a non-compete as part of the sale, that agreement is enforceable. A buyer paying for goodwill is entitled to keep the seller from opening a competing shop the next day. Courts still check duration and geographic scope for reasonableness.¹

SB 25-083 added a specific cap for minority owners who received their ownership as equity compensation. The permissible duration equals the total sale consideration divided by the owner’s average annualized compensation over the shorter of the preceding two years or their time with the business.²

What Happens When an Employer Violates the Rules

Colorado does more than void bad agreements. It penalizes employers for creating or enforcing them. An employer that enters into, presents as a condition of employment, or attempts to enforce a covenant that violates the statute owes $5,000 per affected worker, plus actual damages, reasonable costs, and attorney fees.¹ Simply presenting a non-compliant agreement is enough to trigger liability, even if the employer never tries to enforce it.

The Colorado Attorney General can bring enforcement actions and recover up to three times the amount the employer obtained through the unlawful covenant. Workers and the Attorney General can seek injunctions to stop enforcement.¹

There’s one safety valve. If the employer shows the violation was in good faith and it had reasonable grounds to believe the agreement was lawful, a court has discretion to reduce or eliminate the $5,000 penalty. Good faith does not shield the employer from actual damages or attorney fees.

The Federal Rule Is Not in Effect

The FTC announced a nationwide ban on most non-competes in April 2024, with a narrow carveout for existing senior-executive agreements.⁵ That rule never took effect. The FTC withdrew its appeals in September 2025 and formally removed the rule from the Code of Federal Regulations in February 2026. The agency can still challenge individual agreements under Section 5 of the FTC Act, but there is no federal ban. For Colorado workers, CRS § 8-2-113 is the governing law, and its protections remain among the strongest in the country.

1
Justia Law. Colorado Revised Statutes Title 8 Section 8-2-113
2
Colorado General Assembly. SB25-083 Limitations on Restrictive Employment Agreements
3
Colorado Department of Labor and Employment. Proposed 2026 PAY CALC Order 7 CCR 1103-14
4
Colorado General Assembly. HB22-1317 Restrictive Employment Agreements
5
Federal Trade Commission. FTC Announces Rule Banning Noncompetes