Colorado Extends Noncompete Penalties to Older Agreements

On November 5, 2026, the Colorado Court of Appeals issued a significant decision interpreting Colorado’s noncompete statute in Huset v. EIS Ultimate Holding, LP, 2026 COA 81 (Nov. 5, 2026). Huset is a published decision addressing, among other things, whether the remedy provisions in Colo. Rev. Stat. § 8-2-113(8) apply to covenants not to compete entered into before those enforcement provisions went into effect on August 10, 2022. 

After the Huset ruling, employers that attempt to enforce covenants that are void under Colorado law could be liable for a $5,000 penalty, costs, attorneys’ fees, and actual damages—regardless of when the covenant was entered into or renewed. What’s more, the court of appeals concluded that an employer’s promise not to enforce a void covenant was insufficient to moot an employee’s claim for relief under § 8-2-113. And the court of appeals rejected the former employer’s argument that it had acted in good faith in attempting to enforce the void covenant not to compete. 

The court also provided some important clarification on what it means for an agreement to be for the “protection of trade secrets.” Specifically, the court of appeals held that at the merits stage of the case, an employer is required to prove it actually had bona fide trade secrets to protect in the first place. 

Background on Colo. Rev. Stat. § 8-2-113

Colorado has long had a statute regulating covenants not to compete (e.g., noncompete provisions and customer nonsolicit provisions): Colo. Rev. Stat. § 8-2-113. Effective August 10, 2022, Colorado substantially amended the statute to void covenants not to compete unless the employee (1) earns certain threshold amounts (which vary based on the type of covenant not to compete); (2) the covenant is “for the protection of trade secrets”; and (3) the employer complies with the statute’s particular notice requirements. In addition, the August 2022 amendments also introduced Colo. Rev. Stat. § 8-2-113(8), which prohibits employers from attempting to enforce any covenant not to compete that is void. Employers that do so are liable to employees for a penalty of $5,000, actual damages, costs, and attorneys’ fees.

Case Background

The plaintiff worked for Earth Services & Abatement, LLC (“ESA”), which provides abatement, demolition, and soil and water remediation services. In March 2022, he signed an incentive unit agreement (the “Agreement”) with ESA’s parent company. The Agreement contained a confidentiality provision and a two-year, nationwide noncompete purportedly tied to the protection of trade secrets.

The plaintiff resigned in May 2023 to work for a trucking brokerage he co-founded. Shortly after he resigned, ESA sent the plaintiff three demand letters advising him it intended to enforce the restrictive covenants in his Agreement. Two days after receiving the demand letters, the plaintiff and his new company sued in Colorado state court, seeking a declaratory judgment that the covenants in his Agreement were void. The ESA entities, for their part, responded by filing their own lawsuit in federal court and contemporaneously initiated an arbitration, asserting claims, among others, for breaches of the restrictive covenants in the Agreement. 

The Colorado state case proceeded to a bench trial, after which the trial court found that the plaintiff’s new trucking-brokerage business did not compete with ESA and that ESA failed to prove it owned any trade secrets. The trial court further declared the covenants void, awarded the plaintiff and his new company attorneys’ fees and costs, and assessed a $5,000 penalty against the employer. The Colorado Court of Appeals affirmed the trial court’s decision.

Key Holdings

Section 8-2-113(8)’s Remedies Apply to Covenants Signed Before the 2022 Amendments. Huset’s central holding regards the scope of the remedy provisions in § 8-2-113(8). That section prohibits an employer from entering into, presenting, or attempting to enforce “any covenant that is void under this section.” The enacting legislation, H.B. 22-1317, states that the 2022 amendments apply only to covenants “entered into or renewed on or after” August 10, 2022. The court of appeals held, however, that § 8-2-113(8) applies to enforcement of covenants not to compete that were void under the version of the statute in effect when the covenant was signed. Importantly, the court of appeals only considered whether the covenants in the plaintiff’s Agreement were void under the pre-amendment version of the statute. What this means is that courts are not likely to assess whether a pre-amendment agreement is void under the current statute. Rather, we would expect that courts will continue to assess whether a covenant not to compete is void based on the version of Colorado’s noncompete statute that was in effect when the agreement was signed. Also important is the court’s strong suggestion that § 8-2-113(8)’s prohibitions on “entering into” or “presenting” a void covenant not to compete do not apply to pre-amendment agreements.

In a related, but uncontested, point, the court of appeals said that § 8-2-113’s choice-of-law provision is not limited by H.B. 22-1317’s effective date and applies to all covenants not to compete—regardless of when they were entered into—if the employee resides in Colorado at the time of termination of employment. 

The Plaintiff’s Claims Were Not Mooted by Either the Expiration of the Covenants or the ESA Entities’ Disavowal of Enforcement. On appeal, the ESA entities argued that the plaintiff’s claims were moot because they had advised the trial court they no longer intended to enforce the plaintiff’s Agreement. The court of appeals rejected this argument because ESA, in disavowing enforcement, never agreed to pay the plaintiff anything in connection with its attempts to enforce the agreement. Because the plaintiff was seeking fees, costs, and penalties under § 8-2-113, the court of appeals reasoned, there were still remedies the trial court could offer the plaintiff. Further, the court concluded that the ESA entities’ assurances they would not enforce the agreement now provided the plaintiff little comfort they would not attempt to enforce the agreement later. The ESA entities also argued that the plaintiff’s action before the Colorado state court was moot because the covenants in dispute expired before the trial court entered its findings of act and conclusions of law after the two-day bench trial. In rejecting this argument, the court applied a similar logic: the plaintiff’s claims were not mooted by expiration of his covenants because he still had economic claims. 

The Colorado Court of Appeals Rejected the ESA Entities’ Good-Faith Argument. ESA and its parent entities argued that it acted in good faith on the basis that they did not attempt to enforce the agreement. Colo. Rev. Stat. § 8-2-113(8)(c) currently provides that if an “employer shows that the act or omission giving rise to such action was in good faith and that the employer had reasonable grounds for believing that [its] act or omission was not a violation,” courts may, in their discretion, decline to award aggrieved workers the $5,000 statutory penalty. In Huset, the court of appeals agreed with the district court in reasoning that the ESA entities did not act in good faith because they knew they did not have protectable trade secrets (as evidenced by testimony from ESA and ESA’s failure to challenge the district court’s finding that ESA did not have protectable trade secrets on appeal), but continued to vigorously defend against the plaintiff’s action in Colorado state court and continued to proceed with litigation against the plaintiff and his new company in arbitration and in federal court.

For a Covenant Not to Compete to Be “For the Protection of Trade Secrets,” the Employer Must Actually Have Trade Secrets. The trial court concluded that the covenants not to compete in the plaintiff’s agreement were void because ESA failed to establish at trial that it actually had trade secrets in the first place. The court of appeals noted that there was a difference in what an employer needs to prove at various stages of the case. At the injunctive-relief stage (i.e., temporary restraining order or preliminary injunction), courts focus on whether a covenant not to compete is a contract for the protection of trade secrets, but not that any particular trade secret is at risk of disclosure. The court of appeals clarified that this standard changes at the merits stage. There, the “court decides—by a preponderance of the evidence—whether the trade secrets exception applies, including whether any bona fide trade secrets actually exist.” While the context of the court of appeals’ holding was under the pre-amendment statutory framework, its holding likely applies to covenants entered into after August 10, 2022 as well. What this means is that employers seeking to enforce covenants not to compete should be prepared to identify specific trade secrets that the covenant is designed to protect.

What Huset Means for Employers

Huset’s holding overall increases the risks of attempting to enforce older restrictive covenants against individuals who reside in or work in Colorado. A covenant signed before August 10, 2022, is not shielded from § 8-2-113(8)’s penalties and attorneys’-fee provision if it was void under the prior statute and the employer tries to enforce it now. Employers seeking to enforce covenants not to compete against Colorado employees should confirm they can prove specific, bona fide trade secrets before sending demand letters or filing suit.