Colorado non-compete law: how HB 22-1317 imposed criminal penalties for void agreements, the income thresholds that determine enforceability, and why Colorado is one of the toughest states for employers

Colorado criminalized void non-competes

Most states that restrict non-competes do so through civil law: the agreement is void, the employee can raise it as a defense, and the employer faces no penalty beyond losing the case. Colorado went further. Under HB 22-1317, effective August 10, 2022, an employer who imposes a non-compete on a worker earning below the state's income threshold commits a criminal offense — a class 2 misdemeanor punishable by up to 120 days in jail and a $750 fine per violation.

That's not just regulatory. It's criminal. Colorado is one of the only states where the act of presenting an unenforceable non-compete to a covered employee is itself a violation of law, independent of whether the employer ever attempts to enforce it.

The criminal provision is part of a comprehensive overhaul codified at C.R.S. §8-2-113 that replaced Colorado's prior non-compete framework with one of the most employee-protective regimes in the country. The statute imposes income thresholds, notice requirements, geographic limitations, and a narrow definition of the circumstances under which non-competes can be used even for highly compensated employees.

The income thresholds

Colorado's non-compete framework is structured around two income thresholds, both adjusted annually for inflation.

For non-compete agreements — restrictions on working for a competitor — the threshold tracks the annual compensation equivalent of the Colorado Department of Labor and Employment's threshold for highly compensated workers. For 2025, that threshold was approximately $123,750 annually. Any non-compete with an employee earning below this threshold is void and unenforceable, and the employer's imposition of the agreement is a criminal offense.

For non-solicitation agreements — restrictions on soliciting the employer's customers — the threshold is set at 60% of the non-compete threshold, approximately $74,250 for 2025. Customer non-solicitation agreements with employees earning below this level are similarly void.

The thresholds adjust annually based on the Consumer Price Index, which means they track inflation automatically rather than requiring periodic legislative updates. This is a structural advantage over the fixed thresholds in Illinois, which increase only at legislatively specified intervals and erode in real terms between step-ups.

For employees above the thresholds, non-competes are not automatically enforceable — they must still satisfy the substantive requirements the statute imposes on all agreements.

The four permissible categories

Even for employees above the income thresholds, Colorado's statute limits non-competes to four specific circumstances. The employer must demonstrate that the restriction falls within one of these categories; a general desire to prevent competition is not sufficient.

Protection of trade secrets. The employer must have trade secrets as defined under the Colorado Uniform Trade Secrets Act (C.R.S. §7-74-102) and must demonstrate that the non-compete is designed to protect those secrets. The information must derive independent economic value from not being generally known and must be the subject of reasonable efforts to maintain its secrecy.

Recovery of training expenses for employees who worked less than two years. If the employer invested in specialized training and the employee departs within two years, a non-compete designed to allow the employer to recover that investment is permissible. This is a narrower justification than many states allow — it applies only to training expenses, only within the first two years, and only when the training investment is genuinely substantial and specialized.

Executive or management personnel and their professional staff. Non-competes with high-level executives and the professional staff who support them are permissible, but only above the income threshold and only when the restriction protects a legitimate interest. The "professional staff" extension is broader than it might first appear — it can include assistants, analysts, and coordinators who support executive-level decision-making and have access to strategic information.

Purchase or sale of a business or its assets. Consistent with the approach in virtually every state, non-competes that are ancillary to the sale of a business are enforceable. The seller who receives payment for the goodwill of a business can be restricted from competing with the buyer.

Any non-compete that doesn't fit within one of these four categories is void regardless of the employee's income level. This is a meaningful restriction: an employer who claims a protectable interest that doesn't map to trade secrets, training recovery, executive/management roles, or a business sale has no basis for enforcement in Colorado.

The notice and transparency requirements

Colorado's statute imposes disclosure requirements that go beyond what most states require.

The employer must provide the employee with a separate document that clearly identifies the non-compete, its terms, and the employee's rights under Colorado law. The agreement must be presented before the employee's start date, or, if the agreement is entered into after employment begins, the employer must provide separate notice before the agreement takes effect.

The agreement must include a conspicuous term notifying the employee that the non-compete is governed by Colorado law. This is a choice-of-law provision built into the statutory framework — Colorado law applies to agreements with Colorado-based employees regardless of what law the agreement purports to designate. An employer in Florida or Texas who hires a Colorado remote worker and includes a Florida or Texas choice-of-law clause cannot circumvent Colorado's protections.

Failure to satisfy the notice requirements doesn't just create a procedural defense — it may constitute the criminal violation described above if the employee is below the income threshold. For employees above the threshold, procedural noncompliance weakens the employer's position in any enforcement action.

The reasonableness analysis for qualifying agreements

For agreements that fall within one of the four permissible categories and satisfy the income threshold and notice requirements, Colorado courts apply a reasonableness analysis that evaluates the restriction's scope, duration, and geographic reach.

Duration in Colorado is typically limited to 12 to 18 months for employment non-competes. Two years is possible but faces scrutiny. Anything beyond two years in the employment context is presumptively unreasonable, though longer periods may survive in the sale-of-business context.

Geographic scope must correspond to the employer's actual competitive footprint and the employee's actual area of responsibility. Colorado courts have been skeptical of nationwide restrictions for employees whose roles were regional, and the state's relatively small population and concentrated economic centers mean that even statewide restrictions may be overbroad for employees who worked primarily in a single metro area.

Scope of activity must be limited to genuinely competitive work. A restriction that prevents an employee from performing any function at a competitor — including functions unrelated to the protectable interest — is overbroad and unlikely to survive.

Colorado courts have reformation authority but exercise it more cautiously than Texas or Florida. A court may narrow an overbroad restriction, but the combination of the criminal-penalty provision and the legislative policy favoring employee mobility means that courts are less inclined to rescue poorly drafted agreements than in employer-friendly jurisdictions.

The relationship between non-competes and non-solicitation

Colorado draws a clear distinction between non-compete agreements and non-solicitation agreements, applying different income thresholds and different enforceability standards to each.

A non-solicitation agreement restricts the employee from soliciting the former employer's customers — not from working for a competitor generally. Because non-solicitation agreements are narrower in scope (they restrict who you can contact, not where you can work), Colorado applies a lower income threshold ($74,250 versus $123,750) and evaluates them with somewhat less skepticism.

Non-solicitation of co-workers — agreements that restrict a departing employee from recruiting their former colleagues — is addressed separately. Colorado courts have generally viewed employee non-solicitation provisions more favorably than customer non-solicitation provisions, on the theory that the employer's investment in recruiting and training its workforce is a protectable interest. But the agreement must still satisfy the procedural and substantive requirements of the statute.

The distinction matters because many agreements contain both non-compete and non-solicitation provisions. If the non-compete is void (because the employee is below the non-compete threshold but above the non-solicitation threshold), the non-solicitation provision may still survive as an independent restriction. Employees should evaluate each provision separately rather than assuming that the entire agreement stands or falls together.

The enforcement landscape

Colorado's combination of criminal penalties, income thresholds, limited permissible categories, and notice requirements makes it one of the most difficult states for employers to enforce non-competes. The practical result is that enforcement is concentrated in a narrow band of cases: high-income employees in executive or management roles who had access to genuine trade secrets and signed agreements that complied with every procedural requirement.

For employers, the cost-benefit analysis of enforcement in Colorado is less favorable than in employer-friendly states. The risk of criminal liability for presenting void agreements creates a chilling effect on the employer side — the mirror image of the deterrent effect that non-competes create on the employee side. Employers who use template agreements drafted for Florida or Texas without adapting them to Colorado's requirements face both civil unenforceability and potential criminal exposure.

The criminal-penalty provision has not produced a wave of prosecutions — enforcement is handled primarily through the Colorado Attorney General's office, and the AG has focused on employers who systematically impose void non-competes on covered workers rather than on isolated cases. But the existence of the criminal provision has changed employer behavior. Large employers with Colorado workers have revised their standard agreements to comply with the statute, and many have stopped using non-competes for employees below the threshold entirely.

What Colorado employees should know

If you earn below the non-compete income threshold (approximately $123,750, adjusted annually), your non-compete is void and your employer committed a criminal offense by imposing it. You are not bound by the agreement and you can report the violation to the Colorado Attorney General.

If you earn above the threshold, your non-compete is enforceable only if it falls within one of the four permissible categories (trade secrets, training recovery within two years, executive/management roles, or sale of business), satisfies the notice and transparency requirements, and is reasonable in duration, geography, and scope.

If your agreement was drafted under another state's law and includes a non-Colorado choice-of-law provision, Colorado's statute overrides that designation for Colorado-based employees. You are protected by Colorado law regardless of where your employer is headquartered or what the agreement says about governing law.

If you're negotiating a severance package that includes a non-compete, Colorado's framework gives you substantial leverage. The income thresholds, procedural requirements, and limited permissible categories create enforceability questions that many employers prefer to resolve through a negotiated release rather than litigation.

If you were terminated without cause and the employer is now attempting to enforce a non-compete, the circumstance of your departure weighs against enforcement in Colorado's equitable analysis, particularly if the training-recovery justification was the basis for the restriction and you were denied the opportunity to complete the two-year period.

The national non-compete overview positions Colorado within the heavy-restriction category — short of a total ban, but with protections that approach ban-level strength for the majority of workers who fall below the income thresholds. Among the states that restrict rather than ban non-competes, Colorado's criminal-penalty provision makes it the most aggressive enforcer of employee protections.