Are NDAs enforceable for low-wage workers in Colorado?

Are NDAs enforceable for low-wage workers in Colorado?

In Colorado, NDAs are generally unenforceable against low-wage workers if the agreement effectively functions as a non-compete or restricts the worker's ability to use their general skills. Under the Colorado Restrictive Employment Agreement Act (CREAA), any agreement that prevents a worker from earning a living in their chosen field is void, regardless of how it is labeled.

Key takeaway: If an NDA is so broad that it prevents you from using your general knowledge, skills, or experience gained during employment, it is likely void under Colorado law, regardless of the contract's title.

Understanding the Colorado Restrictive Employment Agreement Act (CREAA)

Colorado has some of the most worker-friendly restrictive covenant laws in the United States. The CREAA, codified at C.R.S. § 8-2-113, strictly limits the use of non-competes and restrictive covenants. For low-wage workers, these protections are absolute.

The Salary Threshold

Colorado law distinguishes between "highly compensated" workers and the general workforce. As of 2024, the threshold for a highly compensated worker is $123,750. If a worker earns less than this amount, the employer faces a significantly higher burden of proof to enforce any restrictive agreement. In practice, most NDAs that attempt to limit a worker's future employment options for those earning below this threshold are unenforceable.

What Constitutes a "Restrictive Covenant"?

Courts look at the substance of the agreement, not the title. If an NDA contains clauses that:

• Prohibit you from working for competitors.
• Restrict you from soliciting former clients or coworkers.
• Prevent you from using "confidential information" that is actually just general industry knowledge.
• Impose heavy financial penalties for working in the same industry.

These are considered restrictive covenants and are subject to the strict requirements of C.R.S. § 8-2-113. If they do not meet the statutory exceptions, they are void.

Comparison: Enforceable vs. Unenforceable Clauses

Action Item: Review your contract for "catch-all" language that defines confidential information as anything learned during your employment. This is a red flag for an overbroad, unenforceable clause.

How to Evaluate Your NDA

If you are a low-wage worker in Colorado and have been asked to sign an NDA, follow these steps to determine your risk:

1. Identify the Scope: Does the NDA define "confidential information" so broadly that it includes your daily tasks and general industry knowledge?
2. Check the Duration: Is there a time limit? Perpetual NDAs are rarely enforceable.
3. Assess the Penalty: Does the contract include liquidated damages or "clawback" provisions? These are often used to intimidate workers into compliance.
4. Consult the Statute: Review C.R.S. § 8-2-113 to see if your specific role falls under the "highly compensated" exception.

The "Trade Secret" Exception

Employers often argue that an NDA is necessary to protect trade secrets. However, under Colorado law, a trade secret must be actual, proprietary information—such as a secret formula, a unique algorithm, or a specific customer list that is not publicly available. General knowledge of how to perform your job does not qualify as a trade secret.

Key takeaway: An employer cannot use an NDA to prevent you from using the skills you developed on the job. If the NDA stops you from working for a competitor because you might "use your knowledge," it is likely an illegal non-compete.

What to Do If You Are Threatened with Enforcement

If an employer threatens legal action based on an NDA, do not panic. Colorado courts are skeptical of these agreements. Document all communications, keep a copy of your signed contract, and consult with an employment attorney. Many employers use these contracts as a bluff to discourage employees from leaving for better opportunities.

Action Item: If you are currently reviewing an employment contract, use TermScore to instantly identify overbroad confidentiality clauses and restrictive covenants that may violate Colorado law. Our AI-powered analysis highlights high-risk language, allowing you to negotiate from a position of strength before you sign.