Colorado recently enacted Senate Bill 25-083, significantly revising the rules governing noncompete and nonsolicit agreements in the state for those involved in the practice of medicine and other healthcare professions, as well as minority-interest holders in business sales. This legislation amends C.R.S. § 8-2-113, the state’s longstanding statute on employment restrictive covenants, to eliminate many healthcare-related restrictive covenants, while also introducing new safeguards for minority-interest business sellers.
The law is not retroactive. The amendments apply only to agreements entered into or renewed on or after August 6, 2025.
Prohibitions on Restrictive Covenants for Healthcare Providers
Under the pre-amendment version of C.R.S. § 8-2-113, Colorado employers are generally prohibited from enforcing noncompete agreements except in a few narrow circumstances. Historically, one of those exceptions applied to physicians. Whereas most noncompetes and customer nonsolicits must be necessary for the protection of trade secrets, physicians had their own provisions. Employers could not prohibit physicians from practicing medicine post-employment, but agreements could require damages reasonably related to injury suffered by termination of the agreement or damages related to competition—without reference to trade secrets.
This historical provision aimed to balance the continuity of patient care with employers’ interests in protecting business interests. But it drew criticism that the potential for financial penalties could discourage physicians form continuing patient case after changing practices. In response, the legislature passed SB 83, which effectively prohibits covenants not to compete (including customer or patient nonsolicits) with a range of healthcare providers.
SB 83 institutes four major updates regarding restrictive covenants in the medical field. First, the historical provisions treating physicians differently are eliminated. Second, any covenant not to compete, including a customer or patient nonsolicit, that restricts an applicable healthcare provider’s practice is void. Third, the law protects certain patient communications. Now, a covenant is void if it prohibits or materially restricts a healthcare provider (as defined in the act) from communicating with patients about the provider’s continuing practice, the provider’s new professional contact information, or the patient’s right to choose a provider. Fourth, the healthcare providers to whom the exceptions apply are expanded beyond physicians. In addition to the practice of medicine, the amendments apply to the practice of dentistry and advanced-practice nursing. The provisions related to patient communication apply to midwives as well.
Importantly, the amended law does not bar restrictive covenants with healthcare providers entirely. C.R.S. § 8-2-113 generally does not apply to employee nonsolicitation covenants, and covenants that do not restrict the healthcare provider’s practice are not per se void. For example, a covenant with a healthcare executive, unrelated to the practice of medicine, may still be enforceable for the protection of trade secrets.
Restrictions on Covenants with Minority Business Owners
SB 83 also imposes new conditions on the enforceability of noncompetes in sale-of-business agreements, particularly for minority-interest owners (i.e., those holding less than 50% ownership). Now, a restrictive covenant tied to a sale is only enforceable if the compensation provided to the seller meets a defined threshold in relation to both the seller’s income and ownership interest.
To enforce a covenant not to compete (including a customer nonsolicit) against a minority owner, the buyer must pay consideration that satisfies a complex formula. This includes comparing the seller’s annual earnings and the amount received from the sale to justify any restriction on future business activity. Specifically, the maximum duration is calculated by dividing the total amount they received from selling their ownership by their average annual cash compensation from the business (including income from their ownership) over the shorter of the past two years or the time they were with the business.
For example, if a minority owner received $50,000 from the sale of their ownership share and earned an average of $100,000 per year in salary and ownership income, the allowable noncompete duration would be $50,000 divided by $100,000, or 0.5 years (six months). The result is that the duration of a sale-of-business covenant for minority-interest owners may be quite short indeed if the proceeds of the sale are a fraction of the employee’s annualize cash compensation.
These provisions aim to prevent buyers from overreaching by imposing restrictions on individuals who lack majority control and do not receive substantial financial benefit from a sale.
Conclusion
Colorado’s SB 83 is the latest material update to Colorado’s noncompete law. Employers and business purchasers should begin reviewing existing agreements now to ensure full compliance beginning with agreements entered into or renewed on or after August 6, 2025 effective date.
