Colorado generally prohibits restrictive covenants, except in narrow circumstances. On May 8, 2025, the Colorado Legislature passed Senate Bill 25-083, which imposes three significant new limitations on the use of restrictive covenants for certain healthcare providers and narrows their application in business sales. These changes will apply to agreements entered into or renewed on or after August 6, 2025.

Current Law Overview

Under current law (C.R.S. § 8-2-113), non-compete and customer non-solicitation agreements are enforceable only in certain circumstances. For instance, non-competes are enforceable for “highly compensated individuals” when the agreement is reasonably necessary to protect an employer’s trade secrets. However, covenants that restrict a physician’s right to practice medicine after leaving an employer are already void under Colorado law.

Key Changes Under SB25-083 Broader Ban on Non-Competes for Healthcare Providers

The amendment prohibits non-compete and non-solicitation agreements for certain licensed healthcare providers, even if they meet the "highly compensated" threshold. This includes those who:

• Practice medicine or dentistry
• Engage in advanced practice registered nursing
• Are certified midwives
• Fall under additional categories listed in C.R.S. § 12-240-113

Liquidated Damages in Physician Contracts

Previously, physician employment agreements could include liquidated damages tied to termination or competition. This amendment removes that provision, meaning that:

• Agreements with unlawful restrictive covenants are unenforceable.
• Agreements without unlawful provisions remain enforceable and may still carry damages or equitable remedies.
• It remains unclear whether competition-related liquidated damages are still enforceable under the new law.

Expanded Patient Communication Rights

Medical providers can no longer be restricted from informing patients about:

• Their continued medical practice
• New professional contact information
• The patient’s right to choose their healthcare provider

Confidentiality and trade secret agreements are still allowed, as long as they don’t prevent sharing general knowledge.

New Limitations on Business Sale Non-Competes

Colorado law has long permitted non-competes in connection with the purchase or sale of a business. SB25-083 narrows this by:

• Allowing non-competes only for owners of a business interest
• Placing time limits on non-competes for minority owners or those who received ownership through equity compensation

For these individuals, the non-compete duration is capped using a formula: Total consideration received ÷ Average annual cash compensation in the prior two years, or the duration of employment if less than two years.