Colorado has taken another step toward narrowing the circumstances in which restrictive covenants—such as covenants not to compete and customer nonsolicits—may be used. Senate Bill 25-083, which takes effect August 6, 2025, now severely restricts nonsolicit and noncompete agreements for certain "health-care providers" and refines the exception allowing for restrictive covenants for the sale of a business.
In 2022, the state legislature overhauled the long-standing Colorado restrictive covenant law to eliminate certain exceptions to the otherwise broad prohibition on noncompetes and nonsolicits. For those that remained, the 2022 amendments placed restrictions on their use (and the use of the previously unrestrained confidentiality agreements) and provided new potential legal claims, rights, and remedies for both aggrieved workers (employees and independent contractors) and new employers seeking to hire them.
SB 25-083 Significantly Limits Restrictive Covenants for Health-Care Providers
SB 25-083 adds new restrictions and refines others. Specifically, the bill nearly eliminates the circumstances under which restrictive covenants are permissible for "health-care providers."
Health-care providers subject to this law include those licensed to practice medicine (including physicians assistants), advanced-practice registered nursing, certified midwifery, and dentistry. This is a significant departure from the statute's prior healthcare language, which applied only to physicians. Moving forward, any restrictive covenant will be void if it prohibits or materially restricts any health-care provider from disclosing to their patients that they will continue the practice of medicine at a new location, from providing their new contact information, or from explaining that the patient has the right to choose their own provider.
SB 25-083 also removes the long-existing provision that had allowed companies to recover damages for competition from a departing physician. The removal of such language calls into question the viability of liquidated damages provisions for these workers.
New Rules for Restrictive Covenants Tied to Business Sales
With respect to the use of restrictive covenants during the sale of a business, SB 25-083 expands the current exception but also restricts the exception's applicability to certain minority shareholders. The exception now explicitly states that it applies if the restrictive covenant is "related to the purchase and sale of a business, a direct or indirect ownership share in the business, or all or substantially all assets of a business" if the restrictive covenant "restricts competition by an owner of an interest in the business."
For minority shareholders who received their ownership as equity compensation "or otherwise in connection with services rendered," SB 25-083 enacts a new formula determining the permissible duration of the restrictive covenant. The formula provides that the restrictive covenant "may not exceed a duration in years calculated by the total consideration received by the individual from the sale, divided by the average annualized cash compensation received by the individual from the business (including amounts received on account of their ownership), during the preceding two years or during the time the individual was affiliated with the business, whichever period is shorter."
In other words, the previously ambiguous question of whether it is permissible to require an employee who receives equity "for services rendered" to sign a restrictive covenant—even if they don't have access to trade secrets—has been answered in the affirmative, though there are now clear(ish) restrictions on what that restrictive covenant can look like and what the individual has to receive in exchange.
Key Takeaways
SB 25-083's restrictions do not apply to restrictive covenants executed prior to August 6, 2025. Colorado companies - particularly those that engage health-care providers, are considering the sale of business assets or the business itself, or provide equity to their employees - are well advised to confer with experienced employment counsel regarding risk mitigation.
SB 25-083 did not remove or modify the 2022 statutory language permitting noncompetes and nonsolicits "no broader than is reasonably necessary to protect the employer's legitimate interest in protecting trade secrets," provided the individual earns a sufficient amount (earnings thresholds change every year), and the covenant is reasonable in temporal and geographic scope.
Additionally, reasonable confidentiality and trade secret protection provisions remain permissible, provided they do not limit disclosure of "information that arises from the worker's general training, knowledge, skill, or experience, whether gained on the job or otherwise." Colorado law still requires a separate notice of these permissible "covenants not to compete," which must be provided in accordance with strict timing requirements. Companies that have not recently submitted their restrictive covenants for review and revision by experienced employment counsel, particularly after the 2022 amendments, are well advised to do so.
If your organization has questions about Colorado's restrictive covenants, please contact the authors of this article or any attorney in Venable's Labor and Employment Group.