Colorado’s new noncompete law: Four steps to enhance compliance

Colorado’s revised noncompete statute takes effect on August 10, 2022. It imposes strict new requirements for noncompete and customer non-solicit agreements. Here are four steps employers can take to ensure compliance with the revised statute.

Review existing templates

Under the new law, noncompete and customer non-solicit agreements (noncompete agreements) are only enforceable if they’re reasonably necessary to protect an employer’s trade secrets. Trade secrets are specifically defined under the Colorado Uniform Trade Secrets Act (CUTSA) and have a different meaning than ordinary confidential information. Unlike the old law, the new statute doesn’t contain an exception for executive and management personnel.

Employers should review their existing templates and make sure that their noncompete agreements are drafted to protect only trade secrets and not anything else, such as general confidential information or business goodwill. While confidential information and goodwill are protectable interests, they aren’t sufficient to hold up a noncompete agreement under the new statute.

Additionally, a well-drafted agreement will (1) expressly define trade secrets based on the definition in the CUTSA; (2) differentiate trade secrets from confidential information generally; and (3) include acknowledgment provisions under which the employee acknowledges that the sole purpose of the noncompete provisions is to protect trade secrets.

Confirm necessity of noncompetes