You can’t withhold final paycheck to get employee to sign noncompete

Q         Can we require an employee to sign a noncompete agreement before they receive their final paycheck?

In short—no, you cannot withhold an employee’s final paycheck until they sign a noncompete. Doing so likely violates Colorado’s restrictive covenant statute and the Colorado Wage Claim Act.

Under Section 8-4-109 of the Colorado Wage Claim Act, when you fire an employee, “wages or compensation for labor or service earned, vested, determinable, and unpaid at the time of such discharge is due and payable immediately.” When an employee quits voluntarily, “the wages or compensation shall become due and payable upon the next regular payday.” Either way, if the employee performed the labor to earn the wages, they are due, and failing to pay them in a timely manner could subject you to significant penalties.

Additionally, requiring an employee to sign a noncompete to receive their final paycheck also likely violates Colorado’s restrictive covenant statute for multiple reasons (which could also subject you to penalties). Colorado’s restrictive covenant statute governs noncompete agreements and voids most noncompetes except for limited exceptions. The law gives Colorado courts discretion to issue penalties up to $5,000 per worker for attempting to procure invalid agreements.