Non-Compete and Non-Disclosure Agreements in Colorado: What Businesses Need to Know

Operating a profitable business requires a hefty investment of both time and money. Unfortunately, employees, partners, and associates may try to capitalize on your success by ‘borrowing’ your ideas and using them elsewhere. Colorado non-compete agreements and non-disclosure agreements can protect your business. Our non-compete attorneys can advise you on drafting non-compete agreements and non-disclosure agreements to protect your livelihood and investments.

A business non-compete agreement formally restricts an employee, contractor, or company from engaging in certain competitive activities. Non-compete agreements can be used to protect your products and ideas from outside competitors. You’ve spent valuable time and money training your workers. The last thing you need is for them to take that information elsewhere and use it to compete against you in the same market.

Businesses are allowed to protect themselves from unfair competition, but not from all competition. Competition is an essential component of free trade in the United States, and Colorado law is very clear that people should be able to engage in productive employment.

Under C.R.S. § 8-2-113, non-compete agreements that restrict trade, such as non-compete and non-solicitation agreements, are generally unenforceable unless they relate to contracts for:

• the purchase or sale of a business or its assets

• trade secret protection

• recovering education or training expenses associated with an employee who has been with an employer for less than two years

• a restriction on executive or management personnel or staff

Non-compete agreements must be reasonable in two areas: duration and geographic scope.

The duration refers to the length of time the non-compete agreement remains in effect after your employee terminates their employment with you. Colorado courts typically consider one to two years a reasonable duration for a non-compete agreement. Anything beyond that, especially longer than five years, is generally not reasonable. An employer cannot limit you from working that long after you’ve terminated your employment.

Geographic scope means the area in which you can continue to work. For example, an employer cannot prevent you from working for competitors in the western United States or the state of Colorado. Rather, they must limit the non-compete agreement to a smaller geographical region — perhaps 20 miles from your former place of employment or the Denver metro area but the geographical area must be defined.

When are Non-compete Agreements Illegal in Colorado?

Colo. Revised Statutes § 8-2-113 makes it unlawful to use force, threats, or other means of intimidation to prevent any person from engaging in any lawful occupation at any place the person sees fit.Any employer who does so can be charged with a class 2 misdemeanor.

How Can a Non-Compete Agreement Help My Company?

A non-compete clause in an employee contract protects your business in the following ways:

• Prevents the unauthorized spread of valuable trade secrets

• Allows you to recoup the money spent on formal education or training if they leave your business within two years

• Allows a specified term of employment for executive and upper management personnel and officers

A non-disclosure agreement, often referred to as an NDA, is a contract that prohibits an employee from disclosing information to either competitors or a specified third party. It also outlines the responsibilities the employee has regarding the safeguarding of information.

NDA for Businesses in Colorado

Performance and innovation are at the heart of most successful businesses. You or your team has likely spent considerable time and effort developing new products and approaches to make your business more effective. It is a smart move to prevent others from misappropriating these developments.

According to a March 2016 Forbes article, non-disclosure agreements can protect your ideas in the following five ways:

• Presenting new and innovative products or practices to potential new partners or investors

• Sharing sensitive or private information about your business with potential buyers

• Demonstrating a new product or practice to prospective buyers or licensees

• Receiving services from outside agents who may have access to sensitive information

• Allowing your employees access to confidential information as part of their job responsibilities

NDA vs Non-Compete Agreement: Key Differences at a Glance

NDA	Non-Compete
Protects confidential information	Restricts future employment
Allows work for competitors	Limits or prohibits competition
Broadly enforceable if reasonable	Enforceable only in limited cases
Lower legal risk	Higher legal risk in Colorado

What Should be in a Non-Disclosure Agreement?

Key elements of a non-disclosure agreement include:

• The names of the parties involved

• A thorough description of the product, technology, or idea to be protected

• Possible exceptions to the agreement

• The term or length of time the agreement is in force

Colorado law limits non-compete agreements. Our non-compete agreement attorneys in Denver and the Colorado Springs metro area can evaluate, draft, or update your agreements. To discuss your options, schedule a consultation online or call 303-688-0944. 

Disclaimer

In April 2024, the Federal Trade Commission (FTC) issued a rule that would have banned most non-compete clauses nationwide. Federal courts blocked the rule, and the FTC later withdrew its legal challenges, meaning the nationwide ban did not take effect. As a result, non-compete agreements remain governed by state law, including Colorado’s restrictive non-compete statute. The FTC may still challenge overly broad non-compete agreements on a case-by-case basis. Because the law in this area continues to evolve, businesses should seek legal guidance before drafting or enforcing non-compete or non-disclosure agreements.

In 2024, the Federal Trade Commission issued a rule that would have prohibited most employer-employee non-compete agreements nationwide. However, federal courts blocked the rule, finding the FTC exceeded its authority. In September 2025, the FTC withdrew its appeals and abandoned the nationwide ban, so the rule will not take effect. Despite this change, the FTC continues to scrutinize and challenge overly broad non-compete agreements on a case-by-case basis under Section 5 of the FTC Act.

To be enforceable, a non-compete agreement must be reasonable in both duration and geographic scope. Courts typically view one to two years as a reasonable duration for non-compete agreements in Colorado, depending on the circumstances. Geographic restrictions must be narrowly tailored to the employer’s actual market area and cannot impose unnecessary barriers to future employment.

Many businesses rely on non-disclosure agreements, employee confidentiality agreements, non-solicitation agreements, trade secret protections, and narrowly tailored Colorado employment contracts to safeguard their interests. These tools often provide effective protection while avoiding the legal risks associated with non-compete agreements.

Yes. Colorado’s strict non-compete statute and ongoing federal scrutiny make this area of law complex. An experienced business attorney can help ensure your agreements comply with current law, protect your business interests, and reduce the risk of costly disputes.

A non-compete agreement restricts where or for whom a person may work after leaving a job. A non-disclosure agreement (NDA) focuses on protecting confidential information and trade secrets without limiting future employment. NDAs are generally easier to enforce and are commonly used as alternatives to non-compete agreements.