January 24, 2022

Colorado Increases Its Criminal Penalty for Violations of Its Noncompete Law

On July 6, 2021, the Colorado legislature passed S.B. 21-271 in an effort to reform the sentencing provisions related to a number of petty offenses and misdemeanors. As a result, several Colorado laws related to labor and employment are affected, including Colorado’s statute addressing restrictive covenant and noncompete agreements, C.R.S. § 8-2-113.  

Under C.R.S. § 8-2-113, it is unlawful to intimidate workers in order to limit their ability to engage in lawful work; and covenants that restrict trade, such as noncompete and nonsolicitation agreements, are void unless the covenants fit within limited exceptions provided under the statute. The penalty if convicted for violating this statute is currently a misdemeanor punishable by a fine between $10–$250 or jail time of not more than 60 days or both. C.R.S. § 8-2-115. 

Effective March 1, 2022, the penalty for violating the noncompete statute will be increased to a class 2 misdemeanor punishable by up to 120 days in jail, or a fine of up to $750, or both as a result of the changes from S.B. 21-271. S.B. 21-271 also amends the text of C.R.S. § 8-2-113 to include the increased penalty as a new subsection (4). 

Although this revision to the statute is not drastic, it is a reminder to employers to review their restrictive covenant and noncompetition agreements regularly to ensure they are meeting the statutory requirements as the consequences for violating Colorado’s noncompete statute include not only voiding the agreement but possible criminal penalties as well. 

This change is also a reminder that several of Colorado’s employment-related statutes carry criminal penalties. Employers should consult an employment attorney with questions about their compliance efforts.  

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