On April 21, 2025, Colorado legislators passed a bill to outlaw restrictive covenants with healthcare providers. The bill further clarifies when noncompete agreements can be enforced in the purchase or sale of a business.
Quick Hits
- The Colorado legislature passed a bill to ban noncompete agreements with doctors, physician assistants, dentists, nurses, and midwives.
- The bill clarifies when noncompetes can be used in the purchase or sale of a business, including the sale of direct and indirect ownership interests.
- If signed by the governor, the bill will take effect on August 6, 2025.
State law permits noncompete agreements and nonsolicitation agreements with certain highly compensated employees, but the bill would exclude healthcare providers from that provision.
State law permits restrictive covenants designed to protect trade secrets. However, the bill would not allow a restrictive covenant if it "prohibits or materially restricts a health-care provider" from disclosing to existing patients prior to the provider's departure the following information:
- the healthcare provider's continuing practice of medicine,
- the healthcare provider's new professional contact information, or
- the patient's right to choose a healthcare provider.
The bill clarifies the state law provision that permits noncompete agreements related to the sale of a business. The bill would allow the purchase or sale of a business exception to be applied to the sale of all, or substantially all, of a business's assets. For the sale of a minority interest in a business for individuals who received the equity as part of their compensation, the noncompete agreement's duration in years would not be permitted to exceed "the total consideration received by the individual from the sale divided by the average annualized cash compensation received by the individual from the business."
Next Steps
Employers in Colorado may wish to inventory all of their noncompete agreements and determine if any apply to healthcare providers. They may wish to consider using other strategies, such as nondisclosure agreements and employee retention strategies, to serve similar purposes, including protecting an employer's trade secrets and training investments.
The bill does not apply to existing noncompete agreements, but if signed by the governor, it will apply to those entered or renewed after August 6, 2025.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
