Colorado § 24-34-407 - Nondisclosure agreements - requirements for enforcement - penalties for noncompliance.

§ 24-34-407. Nondisclosure agreements - requirements for enforcement - penalties for noncompliance.

(1) A provision in an agreement entered into or renewed on or after August 7, 2023, between an employer and an employee or a prospective employee that limits the ability of the employee or prospective employee to disclose or discuss, either orally or in writing, any alleged discriminatory or unfair employment practice, which provision is referred to in this section as a "nondisclosure provision", is void unless:

(a) The nondisclosure provision applies equally to all parties to the agreement;

(b) The nondisclosure provision expressly states that it does not restrain the employee or prospective employee from disclosing the underlying facts of any alleged discriminatory or unfair employment practice:

(I) Including disclosing the existence and terms of a settlement agreement, to the employee's or prospective employee's immediate family members, religious advisor, medical or mental health provider, mental or behavioral health therapeutic support group, legal counsel, financial advisor, or tax preparer;

(II) To any local, state, or federal government agency for any reason, including disclosing the existence and terms of a settlement agreement, without first notifying the employer;

(III) In response to legal process, such as a subpoena to testify at a deposition or in a court, including disclosing the existence and terms of a settlement agreement, without first notifying the employer; and

(IV) For all other purposes as required by law;

(c) The nondisclosure provision expressly states that disclosure of the underlying facts of any alleged discriminatory or unfair employment practice within the parameters specified in subsection (1)(b) of this section does not constitute disparagement;

(d) The agreement includes a condition that if a nondisparagement provision is included in the agreement and the employer disparages the employee or prospective employee to a third party, the employer may not seek to enforce the nondisparagement or nondisclosure provisions of the agreement or seek damages against the employee or any other party to the agreement for violating those provisions, but all other remaining terms of the agreement remain enforceable;

(e) Any liquidated damages provision in the agreement does not constitute a penalty or punishment, and, to be enforced, a liquidated damages provision must provide for an amount of liquidated damages that is:

(I) Reasonable and proportionate in light of the anticipated actual economic loss that a breach of the agreement would cause;

(II) Varied based on the nature or severity of the breach; and

(III) Not punitive; and

(f) An addendum, signed by all parties to the agreement and attesting to compliance with this subsection (1), is attached to the agreement.

(2) (a) Each instance when an employer includes in an agreement a nondisclosure provision that violates subsection (1) of this section constitutes a violation of this section. An employer is liable for actual damages and a penalty of five thousand dollars per violation.

(b) The commission and any employee or prospective employee who is presented with an agreement that includes a nondisclosure provision that violates subsection (1) of this section may immediately bring an action to recover penalties. In addition to penalties, an employee or a prospective employee may recover actual damages, reasonable costs, and attorney fees in any private action brought pursuant to this section.

(3) In any civil action involving a claim of a discriminatory or an unfair employment practice, a plaintiff may present evidence that the employer against whom the action was filed entered into one or more agreements that included a nondisclosure provision involving the conduct of the same individual or individuals who are alleged in the action to have engaged in the discriminatory or unfair employment practice. If such evidence is presented, the evidence shall be considered evidence in support of an award of punitive damages.

(4) In any action brought under this section, if the employer shows that the act or omission giving rise to the action was committed in good faith and that the employer has reasonable grounds for believing that the employer's act or omission did not violate this section, the court may, in its discretion, decline to award a penalty or reduce the amount of the penalty specified in subsection (2)(a) of this section.

Source: L. 2023: Entire section added, (SB 23-172), ch. 389, p. 2329, § 5, effective August 7.

Cross references: For the short title ("Protecting Opportunities and Workers' Rights (POWR) Act") in SB 23-172, see section 1 of chapter 389, Session Laws of Colorado 2023.