Engage Colorado - Regulations that Colorado Hasn't Yet Written are Driving Founders to Texas and Other Destination States

Newsletter — Issue 34 — Thursday, July 30, 2026

This newsletter has been published by Engage Colorado.

The Drivers Series — Category 4 · Factor 4a

Regulations that Colorado Hasn't Yet Written Are Driving Founders to Texas and Other Destination States

This Engage Colorado Newsletter reflects the personal opinions of Dan Caruso, written with the support of the Caruso Ventures team. The Ensuring Colorado's Innovation Future Coalition did not review and has not endorsed this Engage Colorado Newsletter.

When founders and executives evaluate Colorado's regulatory environment, they look at the mandates currently on the books and the trajectory — the number of new employment regulations added each legislative session, the pattern of expansion versus simplification, and the political appetite for more.

And on that trajectory, Colorado is signaling that compliance costs will be higher as each year passes. If we change the trajectory, they will notice that too.

We are moving into Category 4 — The Regulatory Landscape — from The Honest Assessment. This issue covers 4a — Cumulative Employment Regulation. Follow-up issues will cover 4b — Technology Regulation; and 4c — Public Safety and Visible Urban Order.

As with the broader Innovation Vision and The Honest Assessment, I led the preparation of this section and it reflects only my views.

A reminder before you dive in: we cannot address what we have not diagnosed. That is why this series exists. And as I said in “Take a Deep Breath, Colorado” — please don't beat up the messenger.

Factor 4a

What Cumulative Employment Regulation Actually Means

Category 4a of The Honest Assessment is cumulative employment regulation — the combined weight of pay transparency mandates, non-compete restrictions, expanded harassment liability, mandatory payroll premiums, per-transaction fees, and other state-level workforce compliance requirements.

Each individual regulation may have a defensible policy objective. But the cumulative effect is what determines whether a state is friendly or unfriendly to employers and job creators.

Founders and executives evaluate two things:

In geographies where the pattern is consistently additive — where each year brings new mandates and none are removed — companies factor in not just current compliance costs but the anticipated cost of regulations that have not yet been written.

The Scoring

Factor 4a · scores are out of 5  ·  current → trajectory

Colorado sits close to the Departure and far from the Destination clusters on current position, and Colorado's trajectory (1.5) is drifting deeper into Departure territory.

Where Colorado's Employment Regulation Trajectory Is Coming From

Four specific dynamics account for Colorado's 1.5 trajectory score:

1. The FAMLI Act. Colorado's Family and Medical Leave Insurance program imposes a 0.88% payroll premium on employers and employees. The clearest signal of its cost impact: 86% of Colorado's local governments opted out of the program — a rare instance of public-sector entities themselves declining to participate in a state mandate. When even government employers view a regulation as burdensome, founders and private-sector employers take note.

2. Colorado's Equal Pay for Equal Work Act and pay transparency mandates. Colorado was among the first states to require detailed pay transparency in job postings — a mandate that produced significant compliance costs and, in some cases, prompted large national employers to exclude Colorado from remote job postings entirely. Nike, IBM, Johnson & Johnson, and Drizly are among the companies that publicly restricted Colorado candidates from remote roles. Every subsequent legislative session has considered expansions rather than simplifications.

3. Restrictions on non-compete agreements. Colorado's 2022 non-compete law (HB 22-1317) was one of the most restrictive in the country — presumptively voiding most post-employment non-competes and eliminating the longtime executive-and-management exception. Even trade-secrets non-competes now require the employee earn at least $101,250 annually. For technology companies whose competitive moat depends on protecting proprietary knowledge, this signals that Colorado's regulatory environment is trending in a direction hostile to companies investing in Colorado-based talent.

4. New mandates continue year after year. Colorado's 2024 and 2025 legislative sessions added:

Each individual regulation may be defensible on its own merits. The pattern of continuous addition — without any offsetting simplification — is what founders and executives read.

The pattern is consistent: additive year over year, with no offsetting simplifications. Founders and executives read the pattern and price it into their location decisions.

What This Means for Colorado — On Employment Regulation

Reversing this trend requires leadership from Colorado's political leaders — especially our Governor and Senators. They must get vocal about their commitment to improve how Colorado is viewed by those who build businesses and deploy capital, and on why this is critically important to all of Coloradans. And in doing so, they must articulate the need to significantly streamline the regulations that make Colorado unfriendly to business.

This does not mean abandoning workforce protections that matter. It means being deliberate about how Colorado assembles the comprehensive set of employment regulations that would differentiate the state positively relative to the states currently attracting capital.

We are not protecting Colorado's workforce with policies that destroy economic viability. Quite the opposite.

Future newsletters will get more specific about what streamlining Colorado's employment-regulation stack could look like. For now, the point is simple: without deliberate leadership from the Governor, our Senators, and legislative leadership, the pattern of session-after-session additive regulation will continue — resulting in the negative trajectory gaining unwelcomed momentum.

Colorado political leaders are doing the opposite of this today. But if they want Colorado to once again be a mecca for tech and innovation, they will need to evolve their mindsets. And if they do, it will be to the benefit of every Coloradan.

What Comes Next

The next issue in this series covers 4b — Technology Regulation — where Colorado has the worst single-factor score in the entire twelve-factor framework, anchored by the SB24-205 AI regulation that drove Palantir's headquarters relocation to Miami.

If We Work Together, We Can Reverse This Trend

But first, we have to diagnose the source of the problem — which is why this information is being shared.

If Colorado takes the appropriate steps, Colorado can be the most attractive innovation ecosystem in the world — and every Coloradan will share in the economic and cultural prosperity that leadership creates. This is the Innovation Vision for Colorado.

Go Deeper

— Dan Caruso, Engage Colorado

Managing Director of Caruso Ventures, Host of The Bear Roars Podcast, and Board Chair of Tulagi | Boulder Roots