Colorado Wage & Hour Law: An Evolving Landscape

Despite holding office for less than a year, Colorado Governor Jared Polis has signed and advocated for a new wave of legislation. These actions require employers to update policies and possibly wage packages, too.

Minimum Wage

On May 28, 2019, Governor Polis signed HB 1210, repealing a 20-year-old ban on the implementation of local minimum wage ordinances. The state minimum wage is already scheduled to increase to $12 an hour beginning January 2020. Now, local governments may enact their own minimum wage provisions that exceed the rate established by state or federal law. There is a catch: If the locality chooses to impose a minimum wage higher than what is provided under state law, it will not immediately go into effect. Instead, the local government is limited to annual increases of $1.75 or 15 percent (whichever is higher) until it reaches the targeted amount.

Before taking steps to enact its own minimum wage ordinance, a local government must first consult with relevant stakeholders, community groups, and other surrounding local governments.  The law also permits contiguous counties, or municipalities within a county, to enter into an intergovernmental agreement to establish a minimum wage covering their collective area. As written, the statute will only allow 10 percent of the local governments within the state to enact their own minimum wage provisions. The General Assembly is required to amend the statute if more than 10 percent of local governments choose to take advantage of the newfound autonomy to establish their own minimum wage. 

Vacation Pay

Vacation pay has been the subject of a tug-of-war between the state judiciary and the Colorado Department of Labor and Employment (CDLE). In June 2019, the Colorado Court of Appeals held in Nieto v. Clark’s Market, Inc. that an employer’s policy was permissible under the state wage statute. The policy did not pay out accrued but unused vacation pay if the employee was terminated or quit without providing two weeks’ notice. Read our prior coverage of the court’s opinion here. 

A few weeks after the court’s decision, the CDLE proposed amendments to its Wage Protection Act Rules, directly expressing its dissatisfaction with the court’s holding in Nieto, stating, “Recent interpretations that unused vacation pay is forfeited upon employment separation is [sic] contrary to the text and legislative intent of the vacation pay statute.” The CDLE proposal provides:

• The definition of “wage” or “compensation” would include “vacation pay earned in accordance with the terms of any agreement.”
• If the employer provides paid vacation, the employer must pay in accordance with the terms of any existing agreement or policy.
• Forfeiture of earned vacation is prohibited, but some limitations are permissible, including whether there is vacation pay at all, setting amount of vacation pay that can be accrued within the year (or another set timeframe), the process for accrual, and establishing a maximum amount of vacation time that can be accrued within one year.

“Use it or lose it” policies are permitted to the extent that an employer may prohibit carryover from year to year. However, such a policy cannot mandate that the employee forfeit vacation pay accrued.

The CDLE is accepting comments prior to the rule’s adoption and will hold a public hearing regarding the proposal on Tuesday, October 15.

Overtime

The CDLE is also mulling major changes to the state’s overtime law.

A recent study from a popular job search engine concluded that the average full-time employee in Colorado makes $2.34 per hour, or $4,867 annually, “less than they should.” The study motivated labor advocates, who are calling on the state to set its own minimum salary threshold for the “white collar” exemptions to overtime pay requirements.

Currently, because Colorado does not have its own salary threshold, it defaults to the federal level of $23,660 established by U.S. Department of Labor regulations under the Fair Labor Standards Act (FLSA). On September 24, the DOL finalized a new rule raising the salary threshold for managerial, administrative, and professional employees to $35,568 per year, or $684 a week. Read our prior coverage of this development here.

The new federal rule is scheduled to go to into effect January 1, 2020. But, potential legal challenges may delay enforcement.

Some advocates are calling on Colorado to change state laws to broaden the number of employees eligible for overtime by covering all industries and setting a higher salary level than federal standards.

Based on trends in the state legislature over the past year, it is likely there will be some changes to the overtime law, although it may not be as drastic as employee advocates want.

Equal Pay & Salary History Inquiry Ban

The Equal Pay for Equal Work Act was passed on May 13, 2019, and promptly signed into law by Governor Polis on May 22, 2019. Although state equal pay laws have become more common throughout the country, Colorado’s law stands out from the pack largely due to the inclusion of notice requirements for new employment opportunities and employer incentives. The new legislation also bars employers from inquiring about an employee’s prior wage history or relying on such information to determine a prospective employee’s salary. Check out our prior alert here to learn more about the equal pay bill.

Conclusion

With so many changes on the horizon, it’s imperative that Colorado employers stay informed about the evolving employment landscape and are prepared to implement new procedures or update relevant systems to ensure compliance with new laws.

Copyright © 2019 by Ballard Spahr LLP.
www.ballardspahr.com
(No claim to original U.S. government material.)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.

This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.