Audit Legacy Colorado Noncompetes to Avoid a $5,000 Penalty

In Colorado, a pre-2022 void noncompete that looks harmless can become a penalty trigger if the employer tries to enforce it after the law took effect. The issue is not the age of the covenant, but that an old, void covenant can still be acted on after the 2022 enforcement ban took effect. For a Colorado HR lead or founder, the practical question is simple. Before offboarding, can you show that you did not present, threaten, or rely on a covenant the statute now treats as void?

A void legacy covenant is a live liability

Colorado law sets a $5,000 penalty for each worker or prospective worker, plus actual damages, when an employer violates the enforcement ban in section 8-2-113(8)(a). That subsection forbids an employer from entering into, presenting, or attempting to enforce a covenant that is void under the statute. The ban reaches attempts to enforce existing covenants that are void under the current rule, not just new contracts.

The exposure is easy to miss because the covenant may have been signed long ago. An employer's effort to present or enforce a void noncompete can violate the statute. The penalty is not limited to current employees. If you present a void covenant to a job candidate, the same per-person exposure can follow.

The Colorado Court of Appeals made the point in Huset v. EIS, a decision announced on November 5, 2026, and cited as 2026 COA 81. The court held that the 2022 enforcement ban and its remedies reach a covenant already void before the statute took effect, once an employer acts on it afterward. Treat the file as active until counsel clears it.

Run the audit before the exit interview

The audit is a control, not a legal opinion. It is the step that keeps a legacy file from becoming an enforcement step. You are trying to find the covenant, classify the worker, and decide whether any post-2022 action has already created exposure. The list below is short because the risk is narrow: you are not trying to prove the covenant is enforceable. You are trying to prove you did not attempt to enforce a void one.

1. Find the signed covenant and note the signing date. If the date is before 2022, flag it for voidness review.
2. Identify the worker type. Record the role and the classification used in the file.
3. Map the scope. Note the restricted activity, geography, and duration.
4. Check voidness. Determine whether the covenant is void under current Colorado law.
5. List post-2022 enforcement steps. Search for letters, emails, exit scripts, or background-check notes that referenced the covenant after the ban took effect.
6. Confirm separate support. Check the file for a trade-secret agreement or a written good-faith claim that does not rely on the noncompete.
7. Record a stop-or-replace decision. Write whether you will stop, replace, or proceed, and route the file to counsel.

The opening items locate the covenant and the person. The middle items test whether the paper is still usable. The final item forces a decision. If any answer is unclear, quarantine the covenant. That means removing it from exit scripts, stopping reminders, and telling the departing employee that the company is not relying on it. Quarantining is good practice, not a statutory command. The statute commands you to stop attempting to enforce a void covenant.

Document the audit in a short memo. Record the reviewer, the covenant date, the worker type, the scope, and the decision. If counsel later asks what you knew, the memo is the answer. It gives counsel a clean record of what the company knew and when it stopped.

Stop, replace, or document why you proceed

Most legacy covenants should stop. If the worker has trade secrets, use a trade-secret claim or a narrowly tailored replacement that counsel can defend. Presenting a void covenant as a term of employment is also covered. A replacement must be built around the actual risk, not the old paper. Do not let the offboarding calendar drive the legal analysis. If the audit shows a void covenant, pause the conversation and send the file to counsel.