Healthcare professionals across Colorado often face restrictive covenants in their employment contracts. These provisions limit where and when a physician, nurse practitioner, or other healthcare professional can practice after leaving their current position. The enforceability of these clauses depends on specific Colorado statutes and recent legislative changes that have reshaped the legal requirements.
Colorado law generally disfavors restrictive covenants. However, healthcare employers continue to include these provisions in employment agreements, creating confusion about their enforceability. This article examines the current state of non-compete agreements for healthcare professionals in Colorado and what you need to know before signing—or attempting to enforce—such an agreement.
Colorado’s Non-Compete Statute and Recent Changes
Colorado Revised Statute § 8-2-113 governs non-compete agreements in the state. The statute underwent significant revision when House Bill 22-1317 took effect on August 10, 2022. These amendments narrowed when and how non-competes can be enforced in Colorado.
The law now prohibits non-compete agreements for workers earning less than $112,500 annually (adjusted for inflation to $116,000 for 2024). For healthcare professionals, this means many medical assistants, dental hygienists, and entry-level practitioners are exempt from non-compete restrictions.
Colorado law allows for criminal penalties if an employer unlawfully attempts to enforce an invalid non-compete agreements. This can include fines up to $5,000 per violation and potential misdemeanor charges against practice owners or administrators who knowingly violate the statute.
The Four Limited Exceptions Where Healthcare Non-Competes May Be Valid
Despite the general prohibition, four key exceptions exist where non-compete agreements may remain enforceable in healthcare settings:
1. Practice Acquisitions – When a healthcare practice is sold, the buyer can enforce reasonable non-compete provisions against the seller to protect the purchased goodwill and patient relationships.
2. Trade Secret Protection – Non-competes designed to protect genuine trade secrets may be enforced. However, courts carefully scrutinize whether patient lists and practice methods truly constitute trade secrets in the healthcare context.
3. Education and Training Recovery – Employers who provide specialized training may implement reasonable non-competes to recover educational costs. The agreement must specify the training costs and include a declining repayment schedule.
4. Highly Compensated Healthcare Executives – For healthcare executives earning above the statutory threshold, reasonable non-competes may be enforced if necessary to protect legitimate business interests.
Healthcare-Specific Considerations and DORA Implications
The Colorado Department of Regulatory Agencies (DORA) adds another layer of complexity for licensed healthcare professionals. While DORA doesn’t directly regulate non-compete agreements, professional licensing boards may consider certain restrictive practices as potentially unethical if they interfere with patient care.
Medical Board policies address patient abandonment concerns, which can arise when restrictive covenants prevent patients from continuing care with their preferred provider. Healthcare professionals must ensure adequate patient notification and transition planning regardless of contractual restrictions.
Rural healthcare providers face particular scrutiny when it comes to non-compete enforcement. Courts recognize that enforcing non-competes in underserved areas may have public health implications if enforcement would leave patients without reasonable access to care.
Judicial Interpretation of Healthcare Non-Competes
Colorado courts apply a “reasonableness” test when evaluating healthcare non-competes that fall within statutory exceptions. This evaluation typically examines:
- Geographic scope limitations (typically 5-15 miles in urban areas)
- Duration of restrictions (usually 1-2 years)
- Impact on patient care and access
- Legitimate business interests being protected
The Colorado Supreme Court has held that non-competes must be narrowly tailored to protect legitimate business interests without imposing undue hardship on the healthcare professional or the public.
Alternatives to Traditional Non-Competes
Given the legal uncertainties, many Colorado healthcare employers now utilize alternative approaches to protect their interests:
- Non-solicitation provisions prohibiting active recruitment of patients or employees
- Confidentiality agreements protecting genuinely proprietary information
- Liquidated damages clauses establishing predefined compensation rather than practice restrictions
- Notice periods requiring advanced warning before departure
These alternatives often provide meaningful protection while avoiding the legal risks associated with traditional non-compete provisions.
Practical Guidance for Colorado Healthcare Professionals
If you’re a healthcare professional in Colorado facing a non-compete agreement, consider these essential steps:
- Review the agreement with legal counsel experienced in healthcare employment law
- Determine if your role and compensation qualify for statutory exceptions
- Evaluate whether the agreement contains reasonable geographic and temporal limitations
- Document any specialized training received and associated costs
- Understand your obligations regarding patient notification and records transfer
For healthcare employers, creating agreements that comply with current Colorado law is essential to avoid potential criminal penalties and ensure enforceability of legitimate business protections.
Conclusion
Non-compete agreements in Colorado healthcare operate in a restricted legal environment. While not categorically unenforceable, they must fall within narrow statutory exceptions and meet reasonableness requirements to withstand judicial scrutiny.
Healthcare professionals and practice owners should approach these agreements with careful consideration of current Colorado law, professional ethical obligations, and patient care implications. With proper legal guidance, parties can develop appropriate protections that balance practice interests, professional mobility, and patient welfare within the confines of Colorado’s restrictive covenant framework.
At Maureen West & Associates, LLC, we provide specialized legal guidance for healthcare professionals dealing with complex employment agreements, including non-compete provisions. Contact us for a consultation to ensure your contracts comply with current Colorado law while protecting your professional interests.
