Are contract-based non-solicitation of employee agreements enforceable in Colorado?

Are non-solicitation of employee agreements enforceable in Colorado?

In Colorado, non-solicitation of employee agreements are generally void and unenforceable. Under the Colorado Restrictive Employment Agreement Act (CREAA), which significantly tightened restrictions in 2022 and 2024, any covenant that restricts the right of an employee to receive information about job opportunities or restricts the solicitation of employees is prohibited, subject to extremely limited exceptions.

Key takeaway: If your employment contract contains a broad non-solicitation of employee clause, it is likely void under Colorado law, and attempting to enforce it could trigger statutory penalties.

The Legal Landscape: Colorado Revised Statutes § 8-2-113

Colorado has long maintained a hostile stance toward restrictive covenants. The current statutory framework, codified in C.R.S. § 8-2-113, establishes that any covenant not to compete—which includes non-solicitation of employees—is void unless it falls within specific, narrow categories. The law was designed to prevent employers from using legal threats to stifle employee mobility.

The "Sale of Business" Exception

The primary exception to the ban on non-solicitation agreements is the sale of a business. A non-solicitation agreement may be enforceable if it is:

• Reasonable in scope and duration.
• Specifically tied to the sale of a business or the assets of a business.
• Designed to protect the goodwill of the entity being purchased.

Action Item: If you are involved in an M&A transaction, ensure that any non-solicitation language is narrowly drafted to apply only to the specific employees essential to the transferred goodwill, rather than a blanket prohibition on hiring.

Penalties for Non-Compliance

Colorado law does not merely render these clauses void; it actively penalizes employers who attempt to use them. The statute imposes strict liability for the mere act of presenting a void restrictive covenant to an employee or prospective employee.

Action Item: Audit your existing employment templates immediately. If you have "boilerplate" non-solicitation language, remove it to avoid the $5,000-per-violation statutory fine.

Distinguishing Between Solicitation and Hiring

Many employers attempt to draft around the law by framing non-solicitation as a "non-interference" or "non-raiding" clause. Colorado courts look at the substance of the agreement, not the label. If the effect of the clause is to prevent an employee from moving to a competitor or to prevent a competitor from hiring your staff, it will likely be treated as a void restrictive covenant.

What is still allowed?

• Confidentiality Agreements: You may still protect trade secrets and proprietary information.
• Non-Disclosure Agreements (NDAs): These are enforceable provided they do not function as a de facto non-compete.
• Reasonable Training Cost Recovery: You may recover costs for specialized training, provided the agreement meets specific statutory criteria.

Action Item: Focus your contract protections on trade secret protection and intellectual property assignment rather than attempting to restrict the movement of human capital.

How to Evaluate Your Current Contracts

To determine if your current agreements are compliant, follow this internal review process:

1. Identify all restrictive covenants: Locate every clause that limits an employee's ability to solicit, hire, or contact other employees.
2. Assess the "Sale of Business" nexus: Determine if the agreement is part of a bona fide sale of business assets. If not, the clause is almost certainly void.
3. Review for "Choice of Law" provisions: Ensure your contracts do not attempt to bypass Colorado law by selecting a more permissive jurisdiction, as Colorado courts generally refuse to enforce such "choice of law" clauses in employment contracts.
4. Remove and Replace: Strip out void clauses and replace them with robust, enforceable confidentiality and IP protection clauses.

Key takeaway: Do not rely on "savings clauses" (language that says "if this is found to be illegal, the court should rewrite it"). Colorado courts are increasingly unwilling to blue-pencil or rewrite void agreements.

TermScore provides an automated, AI-driven analysis of your employment contracts to identify unenforceable non-solicitation clauses and other restrictive covenants that violate Colorado law. By flagging these risks before you present them to employees, you can ensure your agreements remain compliant and enforceable while avoiding costly statutory penalties.