Several important changes to federal and state employment laws have occurred over the past few months. 

The Ban on Arbitration Act amends federal law to prohibit mandatory arbitration of certain employment-related claims. In Colorado, the Legislature amended the noncompete statute to impose criminal penalties against employers who violate the law.

The Ban on Arbitration Act prevents employers from implementing and enforcing mandatory pre-dispute arbitration or joint-action agreements for claims involving allegations of sexual harassment or sexual assault.

Prior to the act, employers often required new hires to sign such agreements, which provided that any or certain claims employees might later bring against the employers would be subject to arbitration rather than litigation in federal or state courts.

The act states that at the election of the individual alleging sexual harassment or assault, any pre-dispute arbitration agreement or pre-dispute joint-action waiver — agreements foregoing employees’ ability to participate in a class action or joint action against their employers — is unenforceable. An employee may choose to proceed through arbitration or court at their sole discretion when their claims relate to sexual harassment or sexual assault. 

For now, the act only applies to pre-dispute agreements pertaining to claims related to sexual harassment or sexual assault. However, additional categories of employment-related claims could be subject to future legislation. Further, the act applies to any disputes “related to” sexual harassment or sexual assault. This means the act could encompass cases involving other types of alleged discrimination or harassment, but which also contain allegations of sexual harassment or assault. 

Employers are still permitted to enter into arbitration agreements or joint-action waivers with employees after the dispute related to sexual harassment or assault arises or accrues. Whether a dispute is subject to the act is determinable only by a court of law, not an arbitrator.

Employers should amend existing pre-dispute arbitration agreements to exclude mandatory arbitration over matters involving sexual harassment or assault. 

A Colorado law states that, generally, any agreement preventing employees from obtaining subsequent employment is void and unenforceable. This includes noncompete and nonsolicitation agreements subject to four enumerated exceptions. 

The Colorado Legislature recently amended the law to provide that a person who violates the law commits a class 2 misdemeanor punishable by up to 120 days in jail, a fine up to $750 or both. As such, implementation of an agreement that violates this statute is a crime.  

While such criminal penalties are not new, the Legislature’s decision to amend the statute to provide for such penalties directly in the noncompete statute signals the Legislature’s desire to find ways to deter employers from using such agreements — and potentially signals changes in enforcement of such penalties.

Noncompete and nonsolicitation agreements are often subject to intense factual analysis before a court or arbitrator. Such agreements may only be enforced if one of the four exceptions of the statute applies and where the restrictions are reasonable. Whether the agreement is reasonable depends on many factors, including the temporal and geographic scope of the restrictions. 

It remains unclear whether or not the criminal penalties are triggered at the time the employee signs an unenforceable agreement or the employer attempts to enforce the void agreement. Either way, employers should review their existing agreements and carefully analyze their terms for compliance with the law.

This column is intended as general information and is not to be construed as legal advice. Those who need legal advice should consult a lawyer.

Michelle Ferguson and Jennifer Kinkade are employment law attorneys at Ireland Stapleton Pryor & Pascoe.  They represent employers in all types of employment law matters. For more information, visit the website at www.irelandstapleton.com/practice-areas/employment.

This column was provided by the Western Colorado Human Resource Association. For more information, log on to www.wchra.org.