The Colorado Wage Act prohibits employers from deducting earned wages from employees’ paychecks except in limited circumstances. In Interpretive Notice & Formal Opinion #16 (“INFO # 16”), the Colorado Department of Labor and Employment (CDLE) addresses deductions from, and credits towards, employee pay. While INFOs are not binding law, they serve as the CDLE’s officially approved guide on how they apply and interpret Colorado payroll laws.
Jump to: What are Deductions & Credits? | Can Employers Take Money Out? | Final Paycheck Deductions | Illegal Deductions | Wage Credits | Payroll Law FAQs
What Are Wage Deductions and Credits?
Deductions and credits both reduce the wages paid to employees:
- Deductions are amounts subtracted from a paycheck, such as taxes or health insurance premiums.
- Credits are amounts for which employers take credit as wages, such as tips paid to employees.
Under Colorado payroll law, employers have the burden of showing that a particular deduction or credit is legally permitted, and all deductions must be explicitly itemized on an employee’s paystub. Furthermore, the law generally does not allow any deduction that would take the employee’s wages below the minimum wage (with standard exceptions for taxes or lawful wage advances).
Can an Employer Take Money Out of Your Paycheck?
Yes, but only under highly specific circumstances. The following categories of wage deductions are generally authorized by the Colorado Wage Act:
1. Deductions Required by Law or Court Orders
An employer may make deductions required by laws, such as taxes, FICA benefits, wage garnishments, child support, or automatic enrollment in employee retirement plans.
2. Deductions for Items Provided to an Employee (With Written Agreement)
An employer may deduct for loans, advances (including accidental overpayment of wages), goods, services, equipment, or property provided to an employee, provided that:
- The employer has the employee’s lawful, written agreement to make the deduction;
- The deduction does not bring pay below minimum wage; and
- The items provided must be for the employee’s benefit, not for an employer’s cost of doing business.
3. Deductions for Employee Theft
An employer may deduct for a shortage due to an employee’s theft, but only if the employer filed a police report claiming theft by the employee. If criminal charges are not filed within 90 days, or the employee is found not guilty, the employer owes the employee the withheld amount plus interest. Acting without good faith here can result in treble (triple) damages.
Colorado Law on Final Paychecks: Unreturned Property
Under Colorado final paycheck laws, an employer may deduct to recover the amount of money or the value of property that an employee failed to pay or return upon separation, if:
- The employer entrusted the employee with handling the money or property;
- Both parties agreed the employee would return it; and
- The employee failed to return it as agreed.
An employer has 10 calendar days after an employee’s separation to determine that the property was not returned and to assess its value.
Impermissible Wage Deductions
If a deduction is not explicitly authorized under the Colorado Wage Act, it is illegal. According to INFO # 16, an employer cannot deduct from an employee’s wages (or withhold a paycheck entirely) simply because the employee:
- Cost the employer an important sale or client;
- Performed their work in a manner unsatisfactory to the employer;
- Was fired, or failed to give two weeks’ notice before quitting; or
- Caused wear and tear or damage to company property.
Even if an employer believes an employee owes them money, they cannot unilaterally deduct it from a paycheck without authorization. They must pursue other legal avenues.
What Would Be Considered a Credit To My Wages?
There are only three allowable credits an employer may take towards payment of the minimum wage:
- Lodging credits: For employer-provided housing voluntarily accepted by the employee.
- Meal credits: For employer-provided meals, not exceeding reasonable cost, and voluntarily accepted.
- Tip credits: A credit of no greater than $3.02 per hour may offset wages of “tipped employees.” If the minimum wage minus $3.02 plus tips does not equal the full minimum hourly wage, the employer must make up the difference.
Are You Having Issues With Paycheck Deductions?
If you have concerns regarding unlawful deductions or credits that have affected your paycheck, Baird Quinn’s employment attorneys can help. Our team has extensive experience with Colorado employment laws and the Colorado Wage Act and is available to help you navigate this complex area of the law.
Frequently Asked Questions: Colorado Payroll Laws
Can your employer take money out of your check in Colorado?
Yes, but only under strict legal exceptions. An employer can only deduct money for taxes, court-ordered garnishments, benefits you agreed to (like health insurance or retirement), repayment of lawful advances, or documented employee theft that has been reported to the police. They cannot deduct money for poor performance, property damage, or losing a client.
What is the Colorado law on final paychecks and unreturned property?
Under Colorado final paycheck laws, if you fail to return company money or property after separating from the company, your employer is permitted to deduct the value of that property from your final paycheck. However, they must have entrusted you with the property, you must have agreed to return it, and the employer has 10 days to assess the value.
Can an employer deduct money if I don’t give two weeks’ notice?
No. Under Colorado payroll laws, it is entirely illegal for an employer to withhold your final paycheck or deduct wages simply because you quit without giving two weeks’ notice, or because you were fired.