If you run a Colorado small business, you may want to stop former employees from taking clients, joining a competitor, or using information they learned inside your company. That leads to the question many employers ask: are non-compete agreements enforceable in Colorado in 2026? In most ordinary employment situations, the answer is no. Colorado law starts from the position that workers should be free to earn a living, then allows only narrow exceptions for trade secrets, highly compensated workers, certain customer non-solicits, and business-sale situations. This guide explains the 2026 salary numbers, notice rules, penalties, practical examples, and safer alternatives that actually protect your business without relying on a clause that may be void from the start.
| Most Colorado non-compete agreements are void unless they fit a narrow statutory exception under C.R.S. § 8-2-113.For 2026, a trade-secret non-compete generally requires the worker to earn at least the highly compensated worker threshold of $130,014 and the restriction must be no broader than reasonably necessary.Customer non-solicitation covenants use a lower gate: at least 60% of the highly compensated worker threshold, or $78,008.40 in 2026, plus narrow tailoring to trade-secret protection.Colorado requires separate, clear, signed notice before the worker accepts the job offer or at least 14 days before the covenant becomes effective for current workers.An illegal non-compete can create up to $5,000 per harmed worker or prospective worker, plus actual damages, reasonable costs, and attorney fees. |
Usually, no. Colorado makes most employee and contractor non-compete agreements void unless the restriction fits a narrow statutory exception. The rule is not just about whether the restriction seems reasonable. In Colorado, the employer must first clear specific legal gates before the agreement can even be considered enforceable.
For employers, the practical takeaway is simple: do not treat a non-compete as a standard employment agreement clause. A restriction copied from another state, a national template, or an old employee handbook may create more legal risk than protection.
Colorado ties some restrictive covenant exceptions to the highly compensated worker threshold set through the state wage-and-hour framework. For 2026, the highly compensated worker threshold is $130,014. A customer non-solicitation covenant uses 60% of that threshold, which equals $78,008.40.
Colorado Revised Statutes § 8-2-113 is the starting point for every employer reviewing restrictive covenants. Employers can review the current statute here: Colorado Revised Statutes § 8-2-113.
Unlike states that enforce non-competes if the time, geography, and scope seem reasonable, Colorado begins with a broad ban. A covenant that restricts a person from receiving compensation for labor is void unless it fits a statutory exception.
Colorado also limits choice-of-law and venue workarounds. If a worker primarily resided and worked in Colorado when employment ended, the agreement generally cannot force the worker to fight enforceability outside Colorado, and Colorado law governs the enforceability question. That matters for remote workers and out-of-state employers hiring Colorado residents.
Even a covenant that might otherwise qualify can fail if the employer misses the notice rules. Colorado requires notice in a separate document, in clear and conspicuous terms, in the language used to communicate with the worker about performance, and signed by the worker.
Colorado employers still have tools to protect confidential information, trade secrets, customer relationships, training investments, and business-sale value. The key is using the right tool for the right purpose.
A non-compete may be permissible for a highly compensated worker if it protects trade secrets and is no broader than reasonably necessary to protect that legitimate interest. High pay alone is not enough. A $130,014-plus salary does not make a broad industry ban valid if the employer cannot identify real trade secrets and tailor the restriction tightly.
Example: A senior software architect with access to proprietary source code, architecture plans, and unreleased product strategy may be a stronger candidate for a narrow trade-secret restriction than a general sales employee with ordinary market knowledge.
Customer non-solicitation agreements are different from non-competes. They usually do not ban a former worker from taking a new job. Instead, they restrict targeted solicitation of certain customers or prospects. In Colorado, a customer non-solicit must clear the 60% compensation threshold and be no broader than reasonably necessary to protect trade secrets.
Example: A 12-month restriction preventing a former account manager from soliciting customers they directly served may be more defensible than a two-year ban on contacting any company in Colorado.
Colorado permits non-competes connected to the purchase and sale of a business, an ownership share, or substantially all business assets. This is different from an ordinary employee agreement. The point is to protect the value of what the buyer purchased.
Example: If a founder sells a Denver service company for $750,000, the buyer may reasonably want the seller not to reopen the same business across town the next month. A narrowly drafted two-year restriction in a defined market may be easier to justify than a five-year statewide ban.
Colorado allows certain training-cost repayment provisions, but they are not a blank check. The training must be distinct from normal on-the-job training, repayment must be limited to reasonable costs, and the obligation must decrease over time during the two years after the training is completed. Employers should avoid using repayment clauses as disguised non-competes.
Reasonable confidentiality and trade secret provisions remain available. These clauses should protect information the business actually keeps secret, not general experience, ordinary skills, publicly available information, or knowledge the worker has a legal right to use or disclose.
Under the Colorado Uniform Trade Secrets Act, a trade secret generally must have independent economic value because it is not generally known, and the business must take reasonable steps to keep it secret. Employers often lose protection because they label everything confidential but do not actually control access.
Common examples of potentially protectable trade secrets include:
Reasonable safeguards may include password restrictions, role-based access, confidentiality agreements, exit procedures, device return rules, and periodic audits. A company that leaves customer data in a shared folder with no access controls will have a harder time proving trade secret status later.
Colorado law makes illegal non-competes expensive. An employer that enters into, presents, or attempts to enforce a void covenant may be liable for actual damages and a penalty of $5,000 per harmed worker or prospective worker. The worker may also recover reasonable costs and attorney fees.
The math can escalate quickly. If a company gives the same void non-compete to 25 applicants, the potential statutory penalty exposure alone could reach $125,000 before any actual damages or attorney fees. If a former employee loses a job opportunity because a prospective employer is scared off by the clause, the damages analysis can become even more serious.
This is why Colorado employers should not include a non-compete as a scare tactic. A clause that is never enforced can still create legal risk if it is presented as a condition of employment or chills a worker’s job mobility.
The analysis is not avoided by using 1099 contractors. Colorado’s restrictive covenant law applies broadly to individuals performing labor, and many contractor non-competes face the same problems as employee non-competes. A contractor agreement should rely on confidentiality, ownership of deliverables, return-of-property provisions, data security terms, and narrow customer restrictions when legally supported.
Example: A marketing contractor can be required to keep campaign data, pricing, and strategy confidential. But a broad clause saying the contractor cannot work for any competing marketing agency in Colorado for one year is likely a problem unless a narrow statutory exception applies.
Colorado employers are not defenseless. The better strategy is to build an agreement around enforceable protections instead of relying on a broad restriction that prevents work.
A good NDA defines protected information clearly. It should list categories such as customer data, pricing, margins, source code, business plans, vendor terms, financial models, internal processes, and technical documentation. It should also exclude public information, general skills, and information the worker can lawfully disclose.
A customer non-solicit should be limited by role, relationship, time, and information risk. Employers should avoid blanket language covering every customer, prospect, affiliate, and referral source the company has ever had. Narrow terms are easier to defend and easier for employees to understand.
If employees create code, designs, written materials, processes, or other intellectual property, the agreement should address who owns the work. This can be more valuable than a non-compete because it protects the actual asset the company paid to create.
Exit procedures matter. Require workers to return laptops, keys, documents, files, credentials, and company data when employment ends. Turn off account access promptly. Keep a checklist for remote workers because company data may live on personal devices, cloud accounts, or shared drives.
Non-competes try to punish people for leaving. Retention bonuses, equity vesting, deferred compensation, commission plans, promotion paths, and strong culture can reduce turnover without creating the same legal risk. For many small businesses, the best protection is making the company a place employees want to stay.
A practical audit does not need to take months. For many small businesses, a 30-day review can identify the major risk points and create a cleaner template going forward.
If your employment agreements still include non-competes, broad customer restrictions, or old out-of-state template language, now is the time to clean them up. Contact High Plains to review your Colorado employment agreements, update restrictive covenant language, and build practical protections that fit your business without crossing legal lines.
High Plains helps Colorado small businesses replace unenforceable non-competes with stronger confidentiality provisions, trade secret protections, customer non-solicitation language, IP clauses, and exit procedures designed for Colorado law.
Usually no. Most Colorado non-competes are void unless they fit a narrow exception, such as a trade-secret restriction for a highly compensated worker or a restriction connected to the sale of a business.
The 2026 highly compensated worker threshold is $130,014. Even if a worker meets that number, the non-compete must still protect trade secrets and be no broader than reasonably necessary.
Customer non-solicitation covenants use 60% of the highly compensated worker threshold. For 2026, that is $78,008.40, and the restriction still must be narrowly tied to trade-secret protection.
No. Compensation is only one gate. The employer must also show a legitimate trade-secret interest, narrow tailoring, proper notice, and compliance with Colorado law.
Yes, but only if they are carefully drafted. A customer non-solicit should target specific relationships or trade-secret risks and avoid functioning like a broad ban on working in the same industry.
Usually not. If the worker primarily resided and worked in Colorado when employment ended, Colorado law generally governs enforceability, and the agreement cannot force the worker to litigate outside Colorado.
Colorado requires separate, clear, signed notice. Prospective workers must receive notice before accepting the job offer, and current workers generally need at least 14 days before the covenant becomes effective.
An employer can face actual damages and a $5,000 penalty per harmed worker or prospective worker, plus reasonable costs and attorney fees. The Colorado Attorney General may also enforce the statute.
Most contractor non-competes face the same restrictions as employee non-competes. Classification as a 1099 contractor does not let a business avoid Colorado restrictive covenant rules.
Use enforceable alternatives: NDAs, trade secret protections, narrow customer non-solicits, invention assignment clauses, return-of-property rules, data security procedures, and retention incentives.
Disclaimer: This article is provided by High Plains for general informational purposes only and does not constitute legal advice. Reading this content does not create an attorney-client relationship. Laws, fees, regulations, and court decisions referenced may change. For advice on your specific situation, please contact High Plains directly to schedule a consultation.
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The content on this website is not legal advice and is intended for general informational purposes only.
No attorney-client privilege is formed by use of this website or the content hereon.
