Colorado court: Noncompete to protect trade secrets needs actual trade secrets

The Colorado Court of Appeals just announced an important decision analyzing Colorado’s noncompetition statute. The court clarified two things employers must know if they enter into noncompetition and nonsolicitation agreements with their employees. First, to enforce such provisions, they must prove they have trade secrets to protect. Second, the Colorado General Assembly significantly revised the noncompetition statute, effective August 10, 2022, and some of the revisions can apply to agreements entered into before that date.

History of C.R.S. § 8-2-113

Before August 10, 2022, Colorado’s noncompetition statute, C.R.S. § 8-2-113, limited employers’ ability to use covenants not to compete. It had a few exceptions, one of which was that employers could implement noncompetition covenants with employees if the purpose was to protect trade secrets.

In 2022, the general assembly made many revisions to C.R.S. § 8-2-113 that took effect on August 10 that year. A few key, relevant revisions are:

• Narrower trade secrets exception. The revised statute kept the exception that noncompetition covenants could be implemented if they protected trade secrets, but the exception was narrower. Workers had to earn a certain amount, and the covenant had to be no broader than reasonably necessary to protect trade secrets.

• New prohibitions. New subsection (8)(a) barred an employer from entering into, presenting as a term of employment, or attempting to enforce a void covenant.