Colorado Noncompetes: An Old Agreement Can Create New Liability

A noncompete signed before Colorado changed its law in 2022 can still create financial exposure for a business that tries to enforce it today. A new Colorado Court of Appeals decision makes that risk particularly clear when the agreement was unenforceable from the outset.

In Huset v. EIS Ultimate Holding, LP, 2026 COA 81, announced November 5, 2026, the court affirmed a $5,000 penalty and an award of attorney fees and costs arising from efforts to enforce an invalid restrictive covenant. For business owners, the practical lesson is to review the agreement and the supporting facts before sending a demand letter or starting litigation.

What happened?

Scott Huset signed a management incentive agreement in March 2022 while working for Earth Services & Abatement. The agreement included confidentiality and noncompetition provisions. After Huset left in May 2023 to work for his new business, the defendants sent three demand letters stating their intent to enforce the restrictions.

Huset and his new company sought a declaration that the covenants were unenforceable. Following a trial, the district court found that the defendants had not proved the existence of the trade secrets on which they relied and that the restrictions were unreasonable. It rejected the plaintiffs’ damages claims but awarded attorney fees and costs and imposed a $5,000 penalty. The Court of Appeals affirmed.

The agreement’s age did not prevent liability

Colorado’s 2022 amendments generally apply to noncompetes entered into or renewed on or after August 10, 2022. The defendants argued that the newer statutory remedies could not apply to their earlier agreement.

The court disagreed in these circumstances. The restrictions were void under both the law in effect when the agreement was signed and the later law. The conduct triggering liability was the subsequent attempt to enforce those invalid restrictions.

That distinction matters. Huset does not hold that every pre-2022 noncompete is invalid. It establishes that an earlier signing date does not shield an employer from the newer remedies when it later attempts to enforce a covenant that was already void.

Trade-secret language needs factual support

The court also rejected the argument that describing a covenant as protecting trade secrets was enough to establish the statutory exception. At a final decision on the merits, the employer must establish that genuine trade secrets exist. The restriction must also satisfy the applicable limits on its scope. The court distinguished that inquiry from the preliminary assessment made when deciding whether to issue an injunction.

For an owner, this means reviewing both the contract and the evidence: what information needs protection, why it qualifies as a trade secret, how the company protects it, and how the restriction relates to that information.

What business owners should do now

• Review older agreements before enforcement. Check the law applicable when the restriction was adopted and the consequences of enforcement now.

• Identify the information being protected. Avoid relying on a broad list of supposedly confidential material without evaluating whether it supports the restriction.

• Match the restriction to the business need. Review its duration, geography, prohibited activities, and connection to the worker’s role.

• Evaluate each type of provision separately. Employment noncompetes, customer nonsolicitation clauses, confidentiality provisions, and business-sale covenants have distinct requirements under Colorado’s current statute.

• Assess the risk before sending demands. In Huset, the court considered the demand letters and litigation history. Later statements that the defendants would stop enforcement did not erase the earlier conduct or resolve the plaintiffs’ remaining claims.

Section 8-2-113 can expose an employer to actual damages, attorney fees and costs, and a $5,000 penalty per harmed worker or prospective worker. A court may reduce or decline the penalty upon the required showing of good faith and reasonable grounds, but that relief is discretionary.

A focused review before enforcement can help business owners protect legitimate confidential information while avoiding unnecessary restrictions and expensive disputes.

This article provides general information about Colorado law as of November 9, 2026. It is not legal advice and does not create an attorney-client relationship. The appropriate approach depends on the agreement and the circumstances.