Colorado is the latest state to enact a law curbing noncompete and nonsolicitation agreements, but it will not be the last, experts predict.
H.B. 22-1317, “Concerning Restrictive Employment Agreements,” was signed into law in June and took effect Aug. 10. It eliminates noncompete agreements for employees earning less than $101,250 a year and provides for the protection of trade secrets.
The law, which is prospective, also applies to customer nonsolicitation agreements unless they are entered into by someone who earns at least 60% of the threshold for highly compensated workers, or $60,750. Workers must also be provided notice of the law before they accept employment.
Companies that apply noncompetes that do not meet statutory requirements are subject to penalties of $5,000 per worker.
The new law is more stringent than the one it replaced, under which noncompetes could, for instance, be used to recover the expense of educating an employee who worked for the employer for less than two years.
Pointing to the salary restrictions, Bennett Pine, a shareholder with Anderson Kill in New York, said, “It’s one thing to restrict an executive making $500,000. It’s another thing to prevent a file clerk making $35,000 a year from going to a competitor.”
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