On June 8, 2022, Colorado Governor Jared Polis signed Colorado House Bill 22-1317 (the “Bill”), which was passed by the Colorado Legislature on May 10, 2022. Effective 90 days from the end of the legislative session – on August 10, 2022 – Colorado will join the ranks of Illinois, Washington, and other states that have prohibited non-competes for employees earning below a certain wage threshold.  Colorado, which has a notable recent history of hostility towards non-competes – including the threat of criminal penalties – is also poised to now impose significant financial penalties on employers for violating the Bill.

The Bill voids “any covenant not to compete that restricts the right of any person to receive compensation for performance of labor for any employer,” unless the individual is a “highly compensated worker[]” – a threshold that begins at $101,250 in 2022, and will be adjusted annually by the Colorado Department of Labor. Colorado’s new limit is in-line with the very top of the “low wage” non-compete thresholds set by Washington state and Oregon.

The Bill’s prohibitions will also apply to customer non-solicits, but excludes employees earning equal to or greater than 60% of the highly compensated threshold – roughly $60,750 in 2022.

Confidentiality provisions relevant to the employer’s business are still permissible under the Bill, as long as they do not prohibit disclosure of information relating to the worker’s “general training, knowledge, skill, or experience, whether gained on the job or otherwise.” Additionally, covenants for the purchase and sale of a business are also still permissible.

Notably, the Bill states that an employer may now be “liable for actual damages and a penalty of five thousand dollars per worker or prospective worker harmed by the conduct. The Attorney General and any worker or prospective worker harmed by an employer’s conduct may bring an action for injunctive relief and to recover penalties.” Critically, the Bill does not define what constitutes “harm” in this context, or how an employee will prove “actual damages,” which will likely lead to significant questions and disputes between employers and employee’s-counsel.

All restrictive covenants must be provided to a prospective employee before they accept their offer of employment, and to a current employee at least 14 days before the effective date of the covenant. All notices of a restrictive covenant must: (1) be provided with a copy of non-compete; (2) identify the agreement by name and state that the agreement contains a non-compete; and (3) direct the worker to specific sections or paragraphs of the agreement that contain the non-compete.

Finally, as we have seen in other states, the Bill proclaims an employee who primarily resides in Colorado may not be required to adjudicate the validity of their non-compete outside of Colorado. However, in light of the Supreme Court’s Atlantic Marine Construction Co., Inc. v. United States District Court for the Western District of Texas, 571 U.S. 49 (2013) decision, the enforceability of this provision is questionable.

Fortunately for employers, the Bill only applies to covenants entered into or renewed on or after the Bill’s effective date.

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Photo of Steven J. Pearlman Steven J. Pearlman

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular…

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular focus on defending companies against claims of employment discrimination, retaliation and harassment; whistleblower retaliation; restrictive covenant violations; theft of trade secrets; and wage-and-hour violations. He has successfully tried cases in multiple jurisdictions, and defended one of the largest Illinois-only class actions in the history of the U.S. District Court for the Northern District of Illinois. He also secured one of only a few ex parte seizures orders that have been issued under the Defend Trade Secrets Act, and obtained a world-wide injunction in federal litigation against a high-level executive who jumped ship to a competitor.

Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has testified in federal court. His investigations have involved complaints of sexual harassment involving C-suite officers; systemic violations of employment laws and company policies; and fraud, compliance failures and unethical conduct.

Steven was recognized as Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. He is a Fellow of the College of Labor and Employment Lawyers.  Chambers describes Steven as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field.” Steven was 1 of 12 individuals selected by Compliance Week as a “Top Mind.” Earlier in his career, he was 1 of 5 U.S. lawyers selected by Law360 as a “Rising Star Under 40” in the area of employment law and 1 of “40 Illinois Attorneys Under Forty to Watch” selected by Law Bulletin Publishing Company. Steven is a Burton Award Winner (U.S. Library of Congress) for “Distinguished Legal Writing.”

Steven has served on Law360’s Employment Editorial Advisory Board and is a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is regularly quoted in leading publications such as The Wall Street Journal.

The U.S. Chamber of Commerce has engaged Steven to serve as lead counsel on amicus briefs to the U.S. Supreme Court and federal circuit courts of appeal. He was appointed to serve as a Special Assistant Attorney General for the State of Illinois in employment litigation matters. He has presented with the Solicitor of the DOL, the Acting Chair of the EEOC, an EEOC Commissioner, Legal Counsel to the EEOC and heads of the SEC, CFTC and OSHA whistleblower programs. He is also a member of the Sedona Conference, focusing on trade secret matters.

Photo of Joseph O’Keefe Joseph O’Keefe

Joseph C. O’Keefe is a partner in the Labor & Employment Law Department and Co-Head of the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Joe is an experienced trial lawyer who, for more than 30 years, has litigated employment disputes of all…

Joseph C. O’Keefe is a partner in the Labor & Employment Law Department and Co-Head of the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Joe is an experienced trial lawyer who, for more than 30 years, has litigated employment disputes of all types on behalf of employers, before federal and state courts, arbitral tribunals (e.g. FINRA and AAA), and state and federal administrative agencies throughout the U.S. Joe has litigated employment-related lawsuits alleging breach of non-compete agreements, theft of trade secrets, discrimination, sexual harassment, whistleblowing, wage and hour violations, Title IX violations, breach of contract, defamation, fraud and other business related torts. Joe’s practice includes representing clients in complex class and collective litigation, including alleged violation of state and federal pay equity laws, violations of wage and hour laws and discrimination claims. Joe’s experience includes appellate work in both federal and state courts.

In addition to his extensive litigation practice, Joe regularly advises employers, writes and speaks on a wide range of employment related issues. He counsels clients concerning pay equity, use of Artificial Intelligence in the workplace, management of personnel problems, ADA/FMLA compliance, reductions in force, investigation of employee complaints, state and federal leave laws, wage and hour issues, employment policies and contracts.

Joe represents employers in a variety of industries including financial services, higher education (colleges and universities), pharmaceuticals/medical devices, health care, technology, communications, fashion, consumer products, publishing, media and real estate. He frequently writes articles concerning developments in the law and speaks at seminars concerning legal developments in the labor and employment law field.

Photo of E. Sydney Cone E. Sydney Cone

Sydney Cone earned her J.D. from Tulane University Law School, where she was the Senior Online Editor of the Tulane Maritime Law Journal and co-president of Tulane Women in the Law.

Prior to law school, Sydney was a paralegal for Lankler, Siffert, and…

Sydney Cone earned her J.D. from Tulane University Law School, where she was the Senior Online Editor of the Tulane Maritime Law Journal and co-president of Tulane Women in the Law.

Prior to law school, Sydney was a paralegal for Lankler, Siffert, and Wohl, LLP, focusing on white collar criminal and civil litigation.