What is the Colorado Wage Act?
The Colorado Wage Act requires employers to pay wages to employees in accordance with the compensation agreement between the employer and employee in a timely manner. According to the legislative purpose for the Colorado Wage Act, the “Act should be liberally construed to carry out its beneficent purpose of assuring timely payment of wages after a workweek and providing adequate judicial relief when wages are not paid.”
Along the federal Fair Labor Standards Act (FLSA), the Colorado Wage Act is a powerful tool for employees to obtain payment of wages and compensation owed under the employee’s’ compensation agreement with their employer. In addition to recovering compensation owed, employees may recover significant penalties, in addition to their attorneys’ fees and costs incurred in enforcement proceedings. Denver-based Baird Quinn regularly represents and provides legal advice for clients in litigation under the Colorado Wage Act throughout the State of Colorado.
Who is covered by the Colorado Wage Act?
The Colorado Wage Act covers the payment of wages in the employment setting. It is not intended to cover other relationships – such as payments to independent contractors.
A. Who are “Employers” under the Colorado Wage Act?
The Colorado legislature recently amended the definition of “employer” under the Colorado Wage Act to broaden its scope and make individual owners, managers and supervisors subject to potential individual liability for violating the Act. The term “employer” now has the same meaning as set forth in the federal FLSA. The FLSA defines “employer” broadly to include “any person acting directly or indirectly in the interest of an employer in relation to an employee.” 29 U.S.C. § 203(d). The FLSA definition contemplates there being several simultaneous employers who may be responsible for compliance with the law. Significantly, where an individual exercises control over the nature and structure of the employment relationship, or economic control over the relationship, that individual is an employer within the meaning of the Act. Thus, under this definition of employer, an individual manager or supervisor may be subject to liability under the Wage Act.
B. Who are “Employees” under the Colorado Wage Act?
The term “employee” is defined as any person who performs labor or services for the benefit of an employer. In evaluating whether a person is an employee (as opposed to an independent contractor) the relevant factors are the degree of control the employer may or does exercise over the worker and the degree to which the worker performs work that is the primary work of the employer; except that an individual primarily free from control and direction in the performance of the service, both under his or her contract for the performance of service and in fact, and who is customarily engaged in an independent trade, occupation, profession or business related to the service performed is not an employee. This definition excludes independent contractors from coverage under the Act. However, it should be noted that many Colorado employers misclassify workers as independent contractors. The fact that a person is called an “independent contractor” in the terms of any agreement or has even entered into an “independent contractor” agreement, does not automatically make them an independent contractor. Instead, in order for independent contractor status to exist under Colorado law, it must be shown that the company has the right to control the manner in which the work is done.
Wages and Compensation Covered By The Colorado Wage Act
The Colorado Wage Claim Act only governs the payment of “wages” or “compensation.” These terms are defined by the Act as all “amounts for labor or service performed by employees, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculating the same or whether the labor or service is performed under contract, subcontract, partnership, sub partnership, station plan, or other agreement for the performance of labor or service, if the labor or service to be paid for is performed personally by the person demanding payment.”
Examples of Compensation Covered by the Wage Act
These can include:
- Hourly pay
- Paid Sick Leave as provided in C.R.S. 8-4-13.3.
Compensation Not Covered by the Colorado Wage Act
Severance pay is not deemed wages and is not covered by the Wage Act.
No amount is considered to be wages or compensation until such amount is “earned, vested and determinable.” Whether wages or compensation are “earned, vested and determinable” is typically governed by the compensation agreement and/or employer’s practices with respect to payment. Sales commissions, for example, may not be deemed earned until the employer issues an invoice to a customer or a customer makes payment. This issue is typically governed by a sales commission or bonus plan issued by an employer. Several decisions have addressed the critical question of when compensation is deemed earned under the Colorado Wage Act.
How Long Do Colorado Employers Have to Pay Wages After the End of the Employment Relationship?
If an employee is discharged, all earned, vested and determinable wages and compensation are immediately due and payable to the employee. If the employer is unable to pay the employee immediately because the employer’s local office, worksite, or payroll department is not operating, then the employer is given 24 additional hours to make payment, depending on the hours of operation of its payroll department. Payment must then be made on the accounting unit’s next regular workday and a pay statement provided to the employee.
If an employee voluntarily terminates the employment relationship, any unpaid wages or compensation must be made available to the employee on the next regular payday.
Payroll Deductions Permitted Under The Colorado Wage Act
Employers are prohibited from making deductions from the wages or compensation of an employee except under very limited circumstances, as follows:
Deductions for Federal, State and Local Taxes, or by Court Order
- Deductions required by federal law, as well as state and local laws, including deductions for taxes, social security, and court-ordered-deductions (i.e. wage garnishments);
Deductions for Loans, Advances, Goods or Services and Equipment/Property
- Deductions for loans, advances, goods or services, and equipment or property provided by an employer to an employee pursuant to a written agreement, so long as it is enforceable and not in violation of the law;
Deductions Due to Theft
- Any deduction necessary to cover the replacement cost of a shortage due to theft by an employee if a report has been filed with the proper law enforcement agency in connection with such theft pending a final adjudication by a court of competent jurisdiction, except that, if the accused employee is found not guilty in a court action or if criminal charges related to such theft are not filed against the employee within ninety (90) days of the filing of the report, or such charges are dismissed, the accused employee will be entitled to recover any amount wrongfully withheld plus interest. Further, in the event the employer acts without good faith, the accused employee may be awarded an amount equal to three times the amount wrongfully withheld (in addition to the withheld compensation), plus attorneys’ fees and costs.
Deductions Authorized by the Employee
- Any deduction that is authorized by an employee if the authorization is revocable, including deductions for health insurance, savings plans, stock purchases, retirement plans, etc.
Deductions to Cover Employees Failure to Return Money or Equipment
- Deductions to cover amounts for money or property that the employee failed to properly pay for or return to the employer in the case where a terminated employee was entrusted during his or her employment with the collection, disbursement, or handling of such money or property. The employer has ten (10) calendar days after the termination of employment to audit and adjust the accounts and property value of any items entrusted to the employee before the employee’s wages or compensation shall be paid.
Significantly, nothing in this section authorizes a deduction that takes an employee’s wages below the minimum wage established by the FLSA.
Enforcement and Remedies Under The Colorado Wage Act
Any agreement by an employee purporting to waive or release rights under the Colorado Wage Act is void. Thus, an employer may not enter into an agreement with an employee under which an employee releases rights or potential claims to earned wages or compensation under the Wage Act.
If an employer has failed to pay all wages vested and determinable under Colorado and federal wage laws, the employee may make written demand for payment. Beginning January 1, 2023, an employer that does not pay all earned wages within fourteen days after a “written demand is sent to the employer or [an] administrative claim or civil action is sent to or served on the employer,” is liable for the unpaid wages plus an automatic penalty of “the greater of two times the amount of the unpaid wages or compensation or one thousand dollars [$1,000].” If an employee can show that the employer’s failure to pay was willful, the penalty increases to “the greater of three times the amount of the unpaid wages or compensation or three thousand dollars [$3,000].” An employer’s failure to pay is per se willful if the employee can show that the employer has failed to pay wages of a similar type within the five years immediately preceding the claim.
The penalties are available only if the employee has made a written demand for payment. This demand may be made by written correspondence to the employer or through a complaint filed in court or with the Colorado Division of Labor.
May an Employee Sue an Employer for “Civil Theft”?
Colorado has a statutory civil theft statute. See C.R.S. § 18-4-401. To prove civil theft, the plaintiff must show that the defendant has: (1) knowingly obtained control over the property of another without authorization; and (2) that he or she did so with the specific intent to permanently deprive the owner of the benefit of the property. Under the civil theft statute, an employee may recover treble damages, plus attorneys’ fees and costs.
The Colorado Wage Act makes it clear that it is theft under the criminal theft statute for an employer or the employer’s agent to willfully refuses to pay wages or compensation, or to falsely deny the amount of a wage claim, or the validity thereof, or that the same is due, with the intent to secure for himself, herself, or another person any discount upon such indebtedness or any underpayment of such indebtedness with the intent to annoy, harass, oppress, hinder, coerce, delay or defraud the person to whom such indebtedness is due, or intentionally pays or causes to be paid any such employee a wage less than the minimum wage.
In the event an employee prevails on a civil theft claim arising from an employer’s refusal to pay wages, the employee may recover treble damages against the employer, plus the employee’s attorney fees and costs.
Wage Complaints and Investigations By the Colorado Department of Labor and Employment
The Wage Act establishes a detailed procedure for the Colorado Department of Labor and Employment (CDLE) to investigate and decide complaints for unpaid wages of $7,500.00 or less. This is often the most cost effective and efficient manner for employees to obtain payment of unpaid wages in amounts up to $7,500.00. If an employer fails to pay an employee the amount determined to be owed by the CDLE, or a hearing officer within sixty days of the determination or decision, the employer will be liable for:
- Wages Owed.
- Wage Act penalties.
- The employee’s attorney fees and costs if more than $5,000 in wages is determined to be owed.
- Fines payable to the State of Colorado.
Wage Theft Transparency Act
The Wage Theft Transparency Act makes public all final determinations from the Division of Labor Standards and Statistics where an employer has been found in violation of Colorado wage and hour law. The Division posts a spreadsheet to its website identifying all employers against whom an adverse decision was rendered, the date of the award and the amount of the award, and whether fines were assessed.
Statute of Limitations Under The Colorado Wage Act
Any person who is aggrieved by a violation of the Colorado Wage Act may file a suit to recover wages or compensation owed. Any such action, however, must be filed within two (2) years of accrual of the cause of action, except that actions for willful violations may be commenced within three (3) years of accrual.
May an Employee or Employer Recover Attorneys’ Fees and Costs in an action under The Colorado Wage Act?
Both employees and employers may recover attorneys’ fees and costs as prevailing parties in an action under the Colorado Wage Act. If an employee recovers a greater amount than the amount tendered by the employer prior to litigation, then the Court may award the employee reasonable attorneys’ fees and costs.
- An employer may recover its attorneys’ fees in a Wage Act action if:
- (i) the employer makes full legal tender of all amounts demanded in good faith by the employee; and
- (ii) the employee receiving such tender ultimately fails to recover a total sum that is greater than the amount the employer tendered.
Is Retaliation Against a Complaining Employee Prohibited by the Colorado Wage Act?
Employers are prohibited from intimidating, threatening, coercing, blacklisting, discharging or otherwise discriminating against any employee for having filed a complaint, instituted a proceeding or for having testified on anyone’s behalf in an action instituted pursuant to the Colorado Wage Act. At least one court has also found that employers are prohibited from retaliating against employees who complain about Colorado Wage Act violations at work – even if a formal complaint has not been filed – under a theory of public policy wrongful discharge. An employee my recover back pay, reinstatement of employment or front pay, the payment of wages unlawfully withheld, interest on unpaid wages, the payment of a daily penalty for each for each employee whose rights were violated and for each day that the violation occurred or continued, liquidated damages in an amount equal to the greater of two times the amount of the unpaid wages or $2,000 and injunction relief.
Assistance Available from Baird Quinn’s Employment Lawyers
Baird Quinn’s Denver labor and employment lawyers have extensive experience assisting clients with issues under the Colorado Wage Act. We represent clients with demands for payment under the Colorado Wage Act, CDLE investigations and court litigation throughout the State of Colorado.