Legal Updates – June 2022

News

Changes to Colorado’s Non-Compete Law

On May 3, 2022, the Colorado Senate passed HB 22-1317 which, as proposed, is poised to significantly limit the enforceability of any future non-compete agreements within the state.[1] If enacted into law, non-compete agreements executed after the law’s effective date will apply to all employers with employees working or living in Colorado. If Governor Jared Polis ratifies the proposed bill, the law could go in to effect as early as August 10, 2022.

Most notably, the bill would modify Colorado’s current non-compete statute, C.R.S. § 8-2-113[2] to eliminate most of the current exceptions to the State’s general rule voiding most non-compete agreements. Additionally, it would make enforcement of the permitted agreements significantly more difficult.[3] The new law would also eliminate the exception permitting non-compete agreements involving managers, executives, or professional staff to managers or executives, as well as the exception permitting agreements deemed necessary solely for the protection of trade secrets.

Under the proposed bill, exceptions will exist only for two types of agreements:

  • Those involving “highly compensated employees” (HCEs) (currently, those earning at least $101,250), but only where the covenant in question was designed to protect trade secrets; and
  • Covenants for the non-solicitation of customers for employees earning over 60 percent of the HCE salary threshold.

However, HB 22-1317 includes another major exception which permits general confidentiality provisions that are relevant to the company’s business. The amended law would also maintain the existing exceptions for agreements related to the purchase or sale of the company and to those involving the recoupment of “educational and training expenses.”[4]

The new subsection 8(a) of the proposed statute requires that every employer who enters into, presents to a worker or prospective worker as a term of employment, or attempts to enforce any void non-compete agreement be liable for actual damages and a statutory penalty to the aggrieved employee or prospective employee.[5] Enforcement power lies with the Division of Labor Standards and Statistics, the Attorney General, and individuals themselves.

Remedies now available for a violation of subsection 8(a) include:

  • Actual damages, declaratory judgment, injunctive relief, reasonable costs and attorneys’ fees; and
  • Statutory penalty of $5,000 per worker or prospective worker harmed by the conduct.

The statute will contain a “safe harbor” for employers or prospective employers acting in good faith and who had reasonable grounds to believe they weren’t violating the statute.

Additionally, the proposed bill contains language aimed at eliminating confusion that was created during the 2021 Colorado Legislative Session regarding any criminal penalties for a violation of the law. The proposed bill clarifies that it is only a class 2 misdemeanor to use force, threats, or other means of intimidation to prevent any person from engaging in lawful work, and not to simply violate any provision of the statue.[6]

Governor Polis is expected to sign the bill into law with the changes to C.R.S. § 8-2-113 to take effect on August 10, 2022. The Act’s prohibitions and requirements are not retroactive. This means Colorado employers have less than three months to ensure their policies and procedures comply with the Act.

Public Approval of Unions Continues to Grow

According to a Gallup poll conducted in August 2021, U.S. approval of labor unions is at its highest point since 1965.[7] Sixty-eight percent of Americans approve of labor unions, compared to the all-time high of 71% in 1965 and the all-time low of 48% in 2009. Although favoritism of union activity is typically thought of as political, the data shows that union support does not fall clearly on political lines.[8] Support has increased among members of all political affiliations. Better indicators are age and income.[9] Folks between the ages of 18-34 or with an income below $40,000 are more likely to support unions than older folks and those with higher incomes.

The data shows that 90% of Democrats and 47% of Republicans approve of unions, and that labor union membership remains steady at 9% of U.S. adults.[10] Another 8% of Americans live in a household with a union member, meaning 17% of Americans reside in a union household.

Union representation petitions filed with the National Labor Relations Board (NLRB) increased by 57% during the first half of FY 2022 over the same time period in FY 2021. However, the recent notable unionization of Starbucks’ employees at various locations and of Amazon employees at the Staten Island location are preceded by notable failures in 2019 at a Tennessee Volkswagen plant and in 2017 at a South Carolina Boeing plant.

The bottom line is that Americans’ approval of labor unions has been trending upward in recent years and is currently at its highest point in more than fifty years. Approval among Democrats (which is nearly unanimous) has risen over the past year as President Joe Biden has pledged to make his administration one of the most pro-union in history.[11] Public opinion and vocalization in support of labor issues is one of the most determining factors in whether unionization efforts will continue to spread and be successful in the U.S. Only time will tell whether it will lead to a sustained period of public engagement, or if increased unionization will be a flash in the pan.

[1] https://custom.statenet.com/public/resources.cgi?id=ID:bill:CO2022000H1317&cuiq=823c6028-b366-5692-a2bb-4278ec6ad2a0&client_md=51ac91a4c2c310e62bec5a446e67dfc6&mode=current_text.

[2]https://law.justia.com/codes/colorado/2018/title-8/labor-i-department-of-labor-and-employment/article-2/part-1/section-8-2-113/

[3]https://www.jacksonlewis.com/publication/colorado-poised-further-limit-use-non-compete-agreements-raise-penalties-non-compliance

[4] Id.

[5] https://www.bhfs.com/insights/alerts-articles/2022/coming-soon-major-changes-to-colorado-s-non-compete-laws-

[6] Id.

[7] https://news.gallup.com/poll/354455/approval-labor-unions-highest-point-1965.aspx

[8]https://www.mondaq.com/unitedstates/employee-rights-labour-relations/1202774/employment-law-update-june-15-2022

[9] Id.

[10] https://news.gallup.com/poll/354455/approval-labor-unions-highest-point-1965.aspx

[11] Id.