Senate Bill 25-083 Introduced

A Bill for an Act

• Page 1, Line 101Concerning limitations on restrictive employment

• Page 1, Line 102agreements.

Bill Summary

(Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://leg.colorado.gov.)

Under current law, there is an exemption from the general prohibition against covenants not to compete. The exemption allows for a covenant not to compete under specified conditions governing an individual who earns an amount of annualized cash compensation equivalent to or greater than the threshold amount for highly compensated workers. The bill excludes from the highly compensated worker exemption a covenant not to compete that restricts the practice of medicine, the practice of advanced practice registered nursing, or the practice of dentistry in this state.

Under current law, there is also an exemption from the general prohibition against covenants not to solicit customers (nonsolicitation covenant) that allows for a nonsolicitation covenant governing an individual who earns an amount of annualized cash compensation equivalent to or greater than 60% of the threshold amount for highly compensated workers if the nonsolicitation covenant is no broader than reasonably necessary to protect the employer's legitimate interest in protecting trade secrets. The bill also excludes from the highly compensated worker exemption for nonsolicitation covenants a covenant not to compete that restricts the practice of medicine, the practice of advanced practice registered nursing, or the practice of dentistry.

A covenant not to compete governing an individual who has a minority ownership share of a business and who received their ownership share in the business as equity compensation or otherwise in connection with services rendered is permissible if the covenant's duration in years does 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, including income received on account of the individual's ownership interest during the preceding 2 years or during the period of time that the individual was affiliated with the business, whichever period of time is shorter.

The bill prohibits a covenant that prevents or materially restricts a health-care provider from disclosing to a patient to whom the health-care provider was providing consultation or treatment before the health-care provider's departure from a medical practice the following information:

• The health-care provider's continuing practice of medicine;
• The health-care provider's new professional contact information; or
• The patient's right to choose a medical provider.

• Page 2, Line 1Be it enacted by the General Assembly of the State of Colorado:

• Page 2, Line 2SECTION 1.  In Colorado Revised Statutes, 8-2-113, amend

• Page 2, Line 3(2)(a), (2)(b), (2)(c) introductory portion, (2)(c)(I), (2)(d), (3)(c), and

• Page 2, Line 4(9)(a); repeal (5); and add (2)(c)(I.3), (2)(c)(I.5), (2)(c)(I.6), (2)(c)(I.7), and (5.5) as follows:

• Page 3, Line 18-2-113.  Unlawful to intimidate worker - agreement not to

• Page 3, Line 2compete - prohibition - exceptions - notice - rules - definitions.

• Page 3, Line 3(2) (a)  Except as provided in subsections (2)(b), (2)(d), and (3) of this

• Page 3, Line 4section, any a covenant not to compete that restricts the right of any

• Page 3, Line 5person an individual to receive compensation for performance of labor for any employer is void.

• Page 3, Line 6(b)  Except for a covenant not to compete that restricts

• Page 3, Line 7the practice of medicine, the practice of advanced practice

• Page 3, Line 8registered nursing, or the practice of dentistry in this state, this

• Page 3, Line 9subsection (2) does not apply to a covenant not to compete governing a

• Page 3, Line 10person an individual who, at the time the covenant not to compete is

• Page 3, Line 11entered into and at the time it is enforced, earns an amount of annualized

• Page 3, Line 12cash compensation equivalent to or greater than the threshold amount for

• Page 3, Line 13highly compensated workers, if the covenant not to compete is for the

• Page 3, Line 14protection of trade secrets and is no broader than is reasonably necessary to protect the employer's legitimate interest in protecting trade secrets.

• Page 3, Line 15(c)  As used in this subsection (2) section, unless the context otherwise requires:

• Page 3, Line 16(I)  "Annualized cash compensation" means:

• Page 3, Line 17(A)  The amount of the gross salary or wage amount, the fee

• Page 3, Line 18amount, or the other compensation amount for the full year, if the person individual was employed or engaged for a full year; or

• Page 3, Line 19(B)  The compensation that the person individual would have

• Page 3, Line 20earned, based on the worker's gross salary or wage amount, fee, or other compensation if the worker was not employed or engaged for a full year.

• Page 3, Line 21(I.3)  "Health-care provider" means an individual licensed

• Page 4, Line 1to engage in the practice of medicine, registered to engage in the

• Page 4, Line 2practice of advanced practice registered nursing, or licensed to engage in the practice of dentistry.

• Page 4, Line 3(I.5)  "Practice of advanced practice registered nursing" has the meaning set forth in section 12-255-104 (8).

• Page 4, Line 4(I.6)  "Practice of dentistry" has the same meaning as "dentistry" set forth in section 12-220-104 (6).

• Page 4, Line 5(I.7)  "Practice of medicine" has the meaning set forth in

• Page 4, Line 6section 12-240-107 (1) and includes practice as a physician assistant pursuant to section 12-240-113.

• Page 4, Line 7(d)  Except for a covenant not to compete that restricts

• Page 4, Line 8the practice of medicine, the practice of advanced practice

• Page 4, Line 9registered nursing, or the practice of dentistry in this state, this

• Page 4, Line 10subsection (2) does not apply to a covenant not to solicit customers

• Page 4, Line 11governing a person an individual who, at the time the covenant is

• Page 4, Line 12entered into and at the time it is enforced, earns an amount of annualized

• Page 4, Line 13cash compensation equivalent to or greater than sixty percent of the

• Page 4, Line 14threshold amount for highly compensated workers, if the nonsolicitation

• Page 4, Line 15covenant is no broader than reasonably necessary to protect the employer's legitimate interest in protecting trade secrets.

• Page 4, Line 16(3)  The following covenants are not prohibited by subsection (2) of this section:

• Page 4, Line 17(c)  A covenant for the purchase and sale of a business or the

• Page 4, Line 18assets of a business; or not to compete related to the purchase and

• Page 4, Line 19sale of a business, a direct or indirect ownership share in a

• Page 4, Line 20business, or all or substantially all of the assets of a business

• Page 4, Line 21that restricts competition by an owner of an interest in the

• Page 5, Line 1business. For an individual who owns a minority ownership share

• Page 5, Line 2of the business and who received their ownership share in the

• Page 5, Line 3business as equity compensation or otherwise in connection with

• Page 5, Line 4services rendered, the duration in years of a covenant not to

• Page 5, Line 5compete described in this subsection (3)(c) must not exceed a

• Page 5, Line 6number calculated by the total consideration received by the

• Page 5, Line 7individual from the sale divided by the average annualized cash

• Page 5, Line 8compensation received by the individual from the business,

• Page 5, Line 9including income received on account of their ownership

• Page 5, Line 10interest during the preceding two years or during the period of

• Page 5, Line 11time that the individual was affiliated with the business, whichever period of time is shorter.

• Page 5, Line 12(5) (a)  Any covenant not to compete provision of an employment,

• Page 5, Line 13partnership, or corporate agreement between physicians that restricts the

• Page 5, Line 14right of a physician to practice medicine, as defined in section

• Page 5, Line 1512-240-107, upon termination of the agreement, is void; except that all

• Page 5, Line 16other provisions of the agreement enforceable at law, including

• Page 5, Line 17provisions that require the payment of damages in an amount that is

• Page 5, Line 18reasonably related to the injury suffered by reason of termination of the

• Page 5, Line 19agreement, are enforceable. Provisions of a covenant not to compete that

• Page 5, Line 20require the payment of damages upon termination of the agreement may include damages related to competition.

• Page 5, Line 21(b)  Notwithstanding subsection (5)(a) of this section, after

• Page 5, Line 22termination of an agreement described in subsection (5)(a) of this section,

• Page 5, Line 23a physician may disclose his or her continuing practice of medicine and

• Page 5, Line 24new professional contact information to any patient with a rare disorder,

• Page 5, Line 25as defined in accordance with criteria developed by the National

• Page 6, Line 1Organization for Rare Disorders, Inc., or a successor organization, to

• Page 6, Line 2whom the physician was providing consultation or treatment before

• Page 6, Line 3termination of the agreement. Neither the physician nor the physician's

• Page 6, Line 4employer, if any, is liable to any party to the prior agreement for damages

• Page 6, Line 5alleged to have resulted from the disclosure or from the physician's treatment of the patient after termination of the prior agreement.

• Page 6, Line 6(5.5)  A covenant is deemed a covenant that restricts the

• Page 6, Line 7practice of medicine, the practice of advanced practice

• Page 6, Line 8registered nursing, or the practice of dentistry if it prohibits or

• Page 6, Line 9materially restricts a health-care provider from disclosing to

• Page 6, Line 10a patient to whom the health-care provider was providing

• Page 6, Line 11consultation or treatment before the health-care provider's

• Page 6, Line 12departure from a medical or dental practice the following information:

• Page 6, Line 13(a)  The health-care provider's continuing practice of medicine;

• Page 6, Line 14(b)  The health-care provider's new professional contact information; or

• Page 6, Line 15(c)  The patient's right to choose a health-care provider.

• Page 6, Line 16(9) (a)  The attorney general may enforce subsections (2), (3), (4), (5.5), (6), and (8)(a) of this section.

• Page 6, Line 17SECTION 2.  Act subject to petition - effective date -

• Page 6, Line 18applicability. (1)  This act takes effect at 12:01 a.m. on the day following

• Page 6, Line 19the expiration of the ninety-day period after final adjournment of the

• Page 6, Line 20general assembly; except that, if a referendum petition is filed pursuant

• Page 6, Line 21to section 1 (3) of article V of the state constitution against this act or an

• Page 6, Line 22item, section, or part of this act within such period, then the act, item,

• Page 7, Line 1section, or part will not take effect unless approved by the people at the

• Page 7, Line 2general election to be held in November 2026 and, in such case, will take

• Page 7, Line 3effect on the date of the official declaration of the vote thereon by the governor.

• Page 7, Line 4(2)  This act applies to covenants not to compete entered into or renewed on or after the applicable effective date of this act.