Coming August 2022: Colorado Substantially Limits Noncompete Agreements

Beginning August 10, 2022, Colorado will drastically narrow the circumstances in which Colorado employers can seek to enforce noncompete and other restrictive employment agreements. Despite Colorado law already having a general restriction against the use of noncompete agreements, the Colorado General Assembly recently passed, and Gov. Jared Polis has now signed, HB 22-1317. With this bill, Colorado joins the growing number of states enacting increased employee protections against restrictive covenant agreements, including banning such agreements with workers earning below a certain threshold.

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Colorado Issues New Guidance on Prohibition Against Forfeiture of Earned Vacation or PTO

A series of recent developments in Colorado law have made it clear that employers are prohibited from causing employees to forfeit earned vacation time. A compilation of recent developments and the Colorado Department of Labor and Employment’s current position are contained in Interpretive Notice & Formal Opinion (INFO) #14, which explains that:

  1. Employees must be paid all earned vacation pay when their job ends.
  2. No employment policy or agreement can waive or forfeit earned vacation at any time.
  3. All paid leave which can be used at the discretion of the employee is considered “vacation pay” subject to the non-forfeiture rules.

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Several States are Increasing Penalties for Enforcing Non-Compete Agreements

As non-competition laws and the scrutiny of non-compete agreements continue to be in the spotlight, several states are revisiting their non-compete laws.  Colorado has been in the spotlight after the Colorado Legislature passed S.B. 21-271 on July 6, 2021 in an effort to reform the sentencing provisions related to numerous petty offenses and misdemeanors. As a result, several Colorado laws related to labor and employment are affected, including Colorado’s statute addressing restrictive covenant agreements, C.R.S. § 8-2-113.

Under C.R.S. § 8-2-113, it is unlawful to: intimidate workers in order to limit their ability to engage in lawful work; and enter into covenants that restrict trade, such as non-compete and non-solicitation agreements, unless the covenants fit within limited exceptions provided under the statute. The penalty if convicted for violating the non-compete statute is currently a misdemeanor punishable by a fine between $10–$250, or jail time of not more than 60 days, or both. C.R.S. § 8-2-115.   Effective March 1, 2022, the penalty for violating the non-compete statute will be increased to a class 2 misdemeanor punishable by up to 120 days in jail, or a fine of up to $750, or both, as a result of the changes from S.B. 21-271.  S.B. 21-271 also amends the text of C.R.S. § 8-2-113 to include the increased penalty as a new subsection (4).

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Colorado Increases Its Criminal Penalty for Violations of Its Noncompete Law

On July 6, 2021, the Colorado legislature passed S.B. 21-271 in an effort to reform the sentencing provisions related to a number of petty offenses and misdemeanors. As a result, several Colorado laws related to labor and employment are affected, including Colorado’s statute addressing restrictive covenant and noncompete agreements, C.R.S. § 8-2-113. Under C.R.S. § 8-2-113, it is unlawful to intimidate workers in order to limit their ability to engage in lawful work; and covenants that restrict trade, such as noncompete and nonsolicitation agreements, are void unless the covenants fit within limited exceptions provided under the statute. Effective March 1, 2022, the penalty for violating the noncompete statute will be increased to a class 2 misdemeanor punishable by up to 120 days in jail, or a fine of up to $750, or both.

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New Guidance on the Colorado Equal Pay for Equal Work Act

The Colorado Department of Labor and Employment’s Division of Labor Standards and Statistics recently issued revised guidance on the Colorado Equal Pay for Equal Work Act (CEPEWA) and the accompanying Equal Pay Transparency (EPT) Rules. The updated guidance, revised Interpretive Notice & Formal Opinion (INFO) #9 (Revised INFO #9), includes revisions and information regarding notice and posting requirements for out-of-state jobs, disclosure obligations as to “Help Wanted” signs, and noncompliant use of open-ended salary ranges and phrases in job postings.

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Parties Stipulate to Dismissal of Legal Challenge to Colorado Equal Pay for Equal Work Act

On July 6, 2021, the parties to a lawsuit challenging the Colorado Equal Pay for Equal Work Act (CEPEWA) filed a stipulation to dismiss the action without prejudice, with the litigants bearing their own costs and attorneys’ fees. On July 7, 2021, the case was terminated pursuant to the stipulation of dismissal.

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