Colorado: Amendments to Non-Compete Law
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APPLIES TO All Employers with Employees in CO |
EFFECTIVE August 7, 2024 |
QUESTIONS? Contact HR On-Call |
Quick Look
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Discussion
Colorado’s HB 24-1324, titled “Attorney General Restrictive Employment Agreements,” puts in place a law to strengthen protections for employees who are subject to contractual provisions that require repayment to employers for education and training expenses upon termination of employment, also known as “Training Repayment Agreement Provisions” (TRAPs).
Colorado currently allows TRAPS within certain parameters, including that the training is separate and apart from typical on-the-job training, the costs are reasonable, and the recovery by the employer decreases over the term of employment as the employer recoups the initial investment made. The new Colorado law expands upon previous restrictions for TRAPs and increases penalties for overbroad or abusive agreements that violate the law.
Specifically, the new bill considers TRAPs to be a “consumer credit sale” under Colorado Consumer Credit Code (similar to student loans), which imposes specific requirements and enforcement mechanisms. It also provides that an aggrieved worker, or the State Attorney General, can recover three (3) times the amount of the attempted recovery by the employer, in addition to the $5,000 penalty provided by existing law, plus attorneys’ fees, costs, and interest, significantly increasing the potential risks and potential liability for employers. The Attorney General is empowered under the law with enforcement authority and the ability to develop rules to enforce the new bill.
This new law comes as part of the continued efforts by state and federal legislators to restrict the use of non-compete and other similar restrictive covenants in employment agreements. Previously, in August of 2022, Colorado passed additional amendments to the state’s non-compete law which introduced income threshold requirements, strict notice provisions, and harsh monetary penalties for employers who use non-compete and non-solicitation provisions in employment contracts.
Action Items
- Review employment contracts, including any Training Repayment Agreement Provisions with legal counsel for compliance.
- Have appropriate personnel trained on requirements for enforcing Training Repayment Agreement Provisions.
Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2024 ManagEase