As a business owner or HR professional in Colorado, the state’s non-compete law, recently updated in 2022 by HB22-1317, has probably been on your radar for a long time. How does it affect your business? What are the implications for your overall operations?
After all, the non-compete law gives some Colorado employees options they never had. Here’s a snapshot of what those changes entail and what it means to both employer and employee alike.
What is a non-compete agreement?
This contract between an employer and an employee prohibits the employee from working for a competitor or starting a competing business for a specified period after leaving the employer. They are common in many industries, including technology, finance, entertainment, and healthcare, where employees may have access to sensitive information or trade secrets.
Why was the Colorado non-compete law updated?
The amended non-compete statute now provides more protection for employees and encourages innovation and competition. Before the update, the state’s non-compete law was one of the country’s strictest–making it challenging to change jobs or start a business.
However, Colorado’s new non-compete statute restricts the use of non-compete agreements, making it easier for employees to seek new job opportunities without fear of legal consequences.
What are the main changes to the Colorado non-compete law?
Several restrictions have been placed on new and existing non-compete agreements. First, these agreements are only enforceable if the employee’s salary exceeds a certain compensation threshold. For 2022, the minimum salary threshold is $104,000 per year. Also, non-compete agreements can only last a maximum of one year, and employers must pay employees subject to non-compete agreements when they cannot work for a competitor.
Benefits on both sides
This law may impact a company’s ability to retain key employees or enforce previously established non-compete agreements. Therefore, businesses need to review their current contracts and policies to be in compliance with the updated law.
Otherwise, there are benefits for both the employee and employer.
- Employees: This encourages competition because employees who were previously hesitant to leave their current jobs to start their businesses or work for a competitor may now do so without fear of repercussions. The hope is that this will increase both competition and innovation in the state.
- Employers: To retain top talent, employers may need to invest more in their employees’ development and provide opportunities for growth and advancement within the organization, rather than rely on a non-compete covenant. This, in turn, could improve productivity and innovation within the workplace.
For more information on Colorado’s non-compete law, contact Concurrent HRO today.