Colorado updates noncompete enforcement rules and training repayment law

On May 5, 2024, Colorado passed a law focused on training repayment agreements (sometimes pejoratively called “TRAPs” by adding the redundant term, “provisions,” to the name: “training repayment agreement provisions”) and attorney general noncompete enforcement actions.

Specifically, the new law essentially gives the Colorado Attorney General the ability to promulgate regulations concerning training repayment agreements and limits an employee’s remedies when the Attorney General brings an action to enforce the restrictions on noncompetes (broadly defined in Colorado).

Timing of the new law

The law goes into “at 12:01 a.m. on the day following the expiration of the ninety-day period after final adjournment of the general assembly . . . .” That is August 7, 2024.

However, the law also provides an exception: “if a referendum petition is filed pursuant to section 1 (3) of article V of the state constitution against this act or an item, section, or part of this act within such period, then the act, item, section, or part will not take effect unless approved by the people at the general election to be held in November 2024 and, in such case, will take effect on the date of the official declaration of the vote thereon by the governor.” Of course, it is unlikely that this will happen, meaning that the law will likely take effect on August 7, 2024.

The text of the new law is as follows (capitalized terms are new):

SECTION 5. In Colorado Revised Statutes, 8-2-113, amend (3)(a), (8)(a), and (8)(b); and add (8)(d) and (9) as follows:

8-2-113. Unlawful to intimidate worker – agreement not to compete – prohibition – exceptions – notice – rules – definitions.

(3) The following covenants are not prohibited by subsection (2) of this section:

(a) A provision providing for an employer’s recovery of the expense of educating and training a worker where the training is distinct from normal, on-the-job training AND SATISFIES ANY OTHER REQUIREMENTS ESTABLISHED BY THE ATTORNEY GENERAL, BY RULE, REGARDING THE TRANSFERABILITY OF THE TRAINING OR CREDENTIALING THAT IS AVAILABLE TO THE EMPLOYEE AS A RESULT OF THE TRAINING. The employer’s recovery is limited to the reasonable costs of the training and decreases over the course of the two years subsequent to the training proportionately based on the number of months that have passed since the completion of the training, and the employer recovering for the costs of the training would not violate the FEDERAL “Fair Labor Standards Act of 1938”, 29 U.S.C. sec. 201 et seq., or article 4 of this title 8; EXCEPT THAT A PUBLIC EMPLOYER’S RECOVERY OF THE COSTS OF THE TRAINING MAY DECREASE OVER A PERIOD LONGER THAN TWO YEARS.

(8) (a) An employer shall not enter into, present to a worker or prospective worker as a term of employment, or attempt to enforce any covenant not to compete that is void under this section.

(b) An employer that violates subsection (8)(a) of this section is liable for actual damages and a penalty of five thousand dollars per worker or prospective worker harmed by the conduct. The attorney general and any worker or prospective worker harmed by an employer’s conduct may bring an action for injunctive relief and to recover penalties. THE ATTORNEY GENERAL MAY RECOVER THREE TIMES THE AMOUNT OF ANY RECOVERY OR ATTEMPTED RECOVERY BY AN EMPLOYER IN VIOLATION OF SUBSECTION (3)(a) OF THIS SECTION. In addition to injunctive relief and the penalty allowed in this subsection (8)(b), a worker or prospective worker may recover actual damages, reasonable costs, and attorney fees in any private action brought under this section.

(d) WHERE THE ATTORNEY GENERAL HAS BROUGHT AN ACTION UNDER SUBSECTION (2), (3), (4), (6), OR (8)(a) OF THIS SECTION AND HAS RECOVERED ACTUAL DAMAGES, PENALTIES, OR INJUNCTIVE RELIEF PURSUANT TO SUBSECTION (8)(b) OF THIS SECTION, A WORKER OR PROSPECTIVE WORKER IS PRECLUDED FROM RECOVERING THE ACTUAL DAMAGES, PENALTIES, OR INJUNCTIVE RELIEF THAT WAS RECOVERED IN THE ATTORNEY GENERAL’S ACTION.

(9)(a) THE ATTORNEY GENERAL MAY ENFORCE SUBSECTIONS (2), (3), (4), (6), AND (8)(a) OF THIS SECTION.

(b) THE ATTORNEY GENERAL MAY PROMULGATE RULES NECESSARY TO IMPLEMENT AND ENFORCE SUBSECTION (3)(a) OF THIS SECTION.

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Additional firm resources: 

We know how hard it is to keep up with the ever-changing requirements around the country. To help, we have created the following resources (available for free):

We hope you find all of these resources useful. More are coming.

And please note that we are grateful for all of the input we’ve received over the years, and welcome any suggestions for improvements that you may be willing to share.

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*A huge thank you to Erika Hahn for all of her extraordinary help in tracking and monitoring all of the bills around the country and helping me make sure that all of our resources are current and accurate.