Colorado Restricts Non-Compete Agreements for Healthcare Providers

Strategic Insights -

Colorado has enacted legislation that restricts the use of non-compete agreements and customer non-solicits with certain healthcare providers, effective August 6, 2025. This move follows a trend of states banning or curtailing the use of non-compete provisions in employment agreements with physicians and other healthcare providers. The new law exempts non-compete agreements for the protection of trade secrets and allows non-compete covenants for minority owners in certain situations.

Key Takeaways:

  • Colorado's new law restricts non-compete agreements and customer non-solicits with certain healthcare providers, including physicians and advanced practice registered nurses, effective August 6, 2025.
  • To qualify for an exemption, non-compete agreements must be for the protection of trade secrets and reasonably necessary to protect the employer's legitimate interest in protecting trade secrets.
  • The law sets forth a specific calculation to determine the duration of non-compete covenants for minority owners, which should not exceed a number 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.
  • The new law also prohibits agreements that prevent or materially restrict a healthcare provider from disclosing their new professional contact information to patients.
  • The law allows non-compete provisions for individuals that own a minority share in a business, as long as the minority owner received their share in the business as equity compensation or in connection with services rendered.
  • The minimum salary threshold for highly compensated workers in Colorado is $127,091 annually.

Statistics:

  • 7 states have recently passed or amended legislation restricting or banning non-compete provisions in employment agreements with healthcare providers.
  • Colorado's new law restricts non-compete agreements and customer non-solicits with certain healthcare providers, effective August 6, 2025.
  • The number of Ohioans earning over $127,091 annually is at least 5.
  • The number of Colorado physicians and advanced practice registered nurses affected by the new law is unknown.
  • The total consideration received by minority owners under the new law's calculation is a number divisible by their average annualized cash compensation from the business.

Sources:

  • Littler Mendelson P.C.
  • Arkansas' legislation banning physician non-compete agreements
  • Colorado's legislation restricting non-compete agreements and customer non-solicits with healthcare providers (effective August 6, 2025)