By: Mr. Josh Austin

Attention practice owners and associate dentists: Colorado non-compete law has again changed substantially as it relates to associate dentists. With a change in the law, non-compete agreements and most non-solicitation provisions are now no longer enforceable against associate dentists.

The passage of Senate Bill 25-083 (“Senate Bill 83”) amended Colorado’s restrictive covenant statute (Colorado Revised Statutes § 8-2-113) and, notably, its application to licensed dentists. Therefore, it is imperative that Colorado dentists understand the new law regarding non-compete and nonsolicitation agreements.

ELIMINATION OF THE HIGHLY COMPENSATED WORKER EXEMPTION
Prior to Senate Bill 83, Colorado law included an exemption to the general prohibition against covenants not to compete for certain highly compensated workers (the “highly compensated worker exemption”), allowing such agreements under specified conditions.

The recent change now excludes individuals who practice medicine, advanced practice registered nursing, or dentistry from even the possibility of qualifying for the exemption. In other words, compensation levels are no longer relevant—a covenant not to compete, as to persons in these professions, is void.

NON-SOLICITATION AGREEMENTS
Prior to Senate Bill 83, Colorado law also included an exemption to the general prohibition against non-solicitation covenants for certain highly compensated workers, allowing such agreements under specified conditions. Similar to its effect on covenants not to compete, Senate Bill 83 eliminated the possibility of a compensation-based exemption for those individuals who practice medicine, advanced practice registered nursing, or dentistry.

In short, non-compete agreements and non-solicitation agreements applicable to associate dentists are no longer enforceable in the State of Colorado.

SALE OF A DENTAL PRACTICE
Notwithstanding, a covenant not to compete given by the seller in connection with the sale of their practice is still valid and legally enforceable, provided the restrictions are reasonable in both scope and duration. Senate Bill 83 also added specific, formula-based circumstances under which a covenant not to compete may be enforced against a minority owner of a practice in connection with the sale of the practice.

NON-DENTIST EMPLOYEES
As an additional consideration, because Senate Bill 83 focused on those who “practice dentistry”, it appears still permissible to prohibit other employees of the dental practice, such as dental hygienists, from entering into non-solicitation agreements, so long as those individuals earn 60% of the highly compensated employee threshold and the restriction is for the purpose of protecting trade secrets.

PATIENT COMMUNICATIONS
Finally, Senate Bill 83 added a provision that prohibits any covenant that seeks to prevent or materially restrict a dentist from disclosing certain information to their existing patients before their departure from a dental practice. A dental practice cannot prohibit a departing dentist from providing existing patients with the following information: (i) the provider’s continued practice; (ii) the provider’s new professional contact information; and (iii) the right of any patient to choose their provider.

PENALTIES FOR NON-COMPLIANCE
Despite these changes, Senate Bill 83 did not change the penalties for violations of the law, which remain the same. If an employer presents, enters into, or attempts to enforce a non-compete agreement that is void under Colorado law (including as provided by Senate Bill 83), the employer may be fined up to $5,000 per employee or potential employee, plus any actual damages, reasonable costs, and attorney fees incurred by such employee or potential employee. Accordingly, owners of dental practices should carefully review their employment and independent contractor agreements to ensure compliance with Colorado law before presenting them to any licensed dentist.

PRACTICAL IMPACT
In conclusion, dental practices can no longer limit their associate dentists’ ability to compete or communicate with patients when they leave and an associate dentist can now legally work next door to their former employer. This change will likely have a major impact on the job market for associate dentists. Owner dentists will need to consider these competitive risks when making an offer to a new associate or changing the terms of an existing contract.

Josh Austin is an attorney with Mastin Bergstrom, LLC, specializing in practice acquisitions, transitions, management, and related real estate matters (including commercial leasing and purchase and sale agreements), with particular emphasis on dental, veterinary, optometry and physical therapy businesses.