Colorado Employment Law: An Eye-Opening Experience
April 2, 2025
By: Colin A. Walker
Colorado employment law has changed recently in ways that many would find surprising. This is particularly true for employers based outside of Colorado who employ workers in Colorado (perhaps just one or two). The result is often costly mistakes which could have been easily avoided had the employer simply known what it did not know. Here, I am providing bullet points of some of the more common and tricky issues:
- Separation Agreements. It is common for employers to provide severance pay or other severance benefits to an employee who is separating from employment to make the separation go more smoothly, or just to be nice (a good idea in my view). In exchange, the employee is sometimes asked to sign a separation agreement. Often, the separation agreement contains a non-disparagement and/or confidentiality agreement. However, a recent Colorado law makes these provisions illegal if they prohibit an employee from disclosing unfair employment practices such as discrimination or harassment (which is one of the main purposes of these provisions). While there is one exception to the prohibition, it is very limited, difficult to comply with, and usually not advisable. There are severe penalties for even presenting an employee with an agreement that violates this law: the employee can immediately sue for a $5,000 penalty plus attorneys’ fees. This is true even if the employer were to withdraw the agreement immediately upon realizing that it violates the law.
- Employment Applications. Another Colorado law prohibits asking about criminal convictions in an initial employment application or stating in a job advertisement that candidates with criminal convictions should not apply. It does not prohibit asking about convictions in an interview or performing background checks. Employers are also prohibited from asking candidates about compensation history.
- Job Announcements and Postings. Yet another Colorado law requires employers to announce promotional opportunities to current employees, including compensation (or range of compensation) and a description of benefits. If employers choose to post job openings externally (e.g., LinkedIn, Indeed), the law imposes similar requirements, including identifying the compensation (or range of compensation) and description of benefits.
- Covenants-Not-to-Compete. Non-compete and non-solicitation agreements are often a standard part of a hiring packet. Such agreements have always been difficult to enforce in Colorado (and many other states). However, under a Colorado law which went into effect on August 10, 2022, this became much more difficult:
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- Compensation Thresholds. There are compensation thresholds below which the restriction will not be enforceable. In 2025, the threshold for non-compete agreements is annualized compensation of $127,091, and the threshold for non-solicitation of customer agreements is $76,255. (The law does not apply to non-solicitation of employees.)
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- Written Notices. The employer must give notice prior to signing the agreement as follows:
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- Current employees: At least 14 days before the earlier of the effective date of the agreement, or the effective date of any additional compensation or change in the terms or conditions of employment that provides consideration for the agreement.
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- Prospective employees: Before the employee accepts the offer of employment.
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The notice must be in a separate document from any other covenants, in clear and conspicuous terms, in the language in which the employee and the employer communicate and signed by the employee.
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- Choice of Law and Venue. Choice of law and venue provisions which require application of law other than Colorado’s or venue in other states for employees working primarily in Colorado are void.
Here again, there are severe penalties for even asking an employee to sign a covenant that does not comply with the law.
The new law only applies to covenants-not-to-compete which were entered into on or after August 10, 2022. Covenants entered into prior to that date are governed by the prior law.
Because separation agreements, employment applications, non-competes, and non-solicitation agreements are commonly form documents, provided to employees by HR professionals or managers with little or no input or review by legal counsel, these laws are truly traps for the unwary. They are not really difficult to comply with—provided you know about them. Sadly, many do not know what they don’t know. I have made a habit of making a quick call to employment lawyers in other states any time I draft a separation agreement for an employee outside of my state. Almost always, they are happy to give me some quick advice. Often the answer is that there is nothing unusual in their state and we can use the usual forms. However, many a dreadful mistake has been avoided by such calls, and, in that case, my client is always happy to hire the lawyer in the other state. Colorado law may be one of the more difficult states, but it’s not the only one. Some other states have similar laws. Employers with employees outside of their principal place of business should be very careful.