Colorado Wage Act

Colorado Wage Act

The Colorado Wage Act requires employers to pay wages to employees in a timely manner. See Colorado Wage Act. According to the legislative purpose, 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.” The Colorado Department of Labor has published a “FACT SHEET” with a helpful summary of many of the provisions of the Act.

Along the federal Fair Labor Standards Act (FLSA), the Colorado Wage Act is a powerful tool for employees to obtain payment of wages owed under the employee’s compensation agreement with an employer.  Denver-based Baird Quinn regularly represents and provides legal advice for clients in litigation under the Colorado Wage Act.  See e.g. Legal Life Plans Judgment; Woods Wage Act Judgment; Kay Wage Act Award. 

Coverage Under The Colorado Wage Act

The Colorado Wage Act covers only “employers” and “employees.” The term “employer” is defined to include “every person, firm, partnership, association, corporation, migratory field labor contractor or crew leader, receiver, or other officer of court in Colorado, and any agent or officer thereof … employing any person in Colorado.” The term “employee” is defined to include any salesperson or other individual who performs labor or services for the benefit of an employer who can command when, where, and how much labor or services shall be performed.” The Act also provides that an individual who is primarily free from “control and direction in the performance of the service” and who is “customarily engaged in an independent trade, occupation, profession, or business related to the service performed” are considered exemptions from the Act and not subject to the wage orders contained within.

While the Act does not cover “independent contractors,” it should be noted that many Colorado employers misclassify workers as independent contractors. The fact that an employee 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 does not have the right to control the manner in which the work is done.  All other persons performing work for an employer are considered non-exempt employees under the act.

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, subpartnership, 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.”  See Wages under Colorado Wage Act Extend to Many Forms of Compensation.

No amount is considered to be wages or compensation until such amount is “earned, vested and determinable.” In regards to employees offered bonuses or commissions by their employer, this compensation earned by such employees are included within the definition of wages or compensation. Vacation pay is also wages under the Wage Act.  Several decisions have addressed the critical question of when compensation (whether bonuses or vacation) is deemed earned under the Colorado Wage Act.  See e.g., Whether Vacation Pay May Be Lost Due To Termination.

Severance pay is not deemed wages and is not covered by the Wage Act.

Wage and Compensation Due Upon Termination of Employment Under The Colorado Wage Act

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 up to 24 additional hours to make payment, depending on the hours of operation of its payroll department.  Payment must then be made on 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 may make the following deductions from employees’ paychecks:

  • 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, pursuant to an enforceable written agreement, to pay back an indebtedness for loans or advances made in previous pay periods, goods or services and equipment or property provided by the employer to the employee;
  • Deductions authorized by the employee, such as for benefit plan premiums or insurance, 401(k) plans, charities, and deposits to financial institutions;
  • Deductions to cover amounts for money or property not returned upon termination/resignation by the employee to whom such money or property was “entrusted,” as required by the terms of an agreement between the employer and employee.
  • Deductions to cover a shortage due to theft by an employee if a report has been filed with law enforcement pending final adjudication by the courts.

With respect to deductions for theft, the employee is entitled to recover any amount wrongfully withheld, plus interest, if criminal charges are not filed within ninety days of the filing of the report or if the employee is acquitted in court proceedings. If the employer acts without good faith, the employee may also recover up to three times the amount wrongfully withheld. In an action to recover such amount, the prevailing party is entitled to recover attorneys’ fees and costs (see discussion below).

An employer has ten (10) days after an employee is terminated or resigns to determine whether the employee has returned all property. If all property has not been returned, the employer may deduct that amount from the employee’s final paycheck, as long as the reduction does not reduce the employee’s pay below minimum wage which is the minimum salary permitted under the act.

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 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.  In the event of a dispute over wages due to an employee, the employer must at least pay all amounts that are indisputably due, without condition or additional civil action. Any agreement by an employee purporting to waive or release rights under the Colorado Wage Act is void.

If an employer, in good faith, makes payment to the employee within fourteen (14) days of receiving a written demand, the employer will not be liable for any penalty unless, in a lawsuit or administrative proceeding, the employee is awarded more than the amount tendered by the employer. If an employer does not make any payment within the 14-day period, the employer is deemed to have made a tender offer of $0.

If payment is not made by the employer within fourteen (14) days after receipt of the demand, the employer shall be liable for the wages and a penalty in the greater amount of either (a) 125% of the first $7,500 of wages or compensation due plus 50% of any wages or compensation due in excess of $7,500, or (b) the employee’s wages for each day, which accrues up to ten days, “until such payment or other settlement satisfactory to the employee is made.” If the failure to pay is found to be “willful,” the penalty is increased by 50%.

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 mailing address of the employer, a complaint filed in Small Claims Court, or a complaint filed with the Colorado Division of Labor. A complaint to recover earned wages may be filed on-line on the Colorado Division of Standards website. See Online-Wage-Complaint-Form.

Wage Protection Act of 2014

In the Wage Protection Act of 2014, the Colorado legislature made significant changes to the enforcement scheme for the Colorado Wage Act. The Act changed the law so current employees – and not just former employees – may demand unpaid wages and be eligible to recover penalties. The Act also establishes a detailed new procedure for the Colorado Division of Labor under the Colorado Department of Labor and Employment (CDLE) to investigate and adjudicate complaints for unpaid wages of $7500 or less. Finally, the Act increases the penalties that may be assessed against employers for violations of the Wage Act. See Wage-Protection-Act-2014-Frequently-Asked-Questions.

While the written notice previously needed to be sent within sixty (60) days of an employee’s termination of employment, that sixty (60) day time frame has been eliminated. As a result, an employer may be subject to penalties on any written demand for payment made within the two-year statute of limitations for a violation or three-year statute of limitations for a willful violation.

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 ( under the C.R.S.). See Decisions Published by Colorado Department of Labor. 

Statute of Limitations Under The Colorado Wage Act

Any person who is aggrieved by a violation of the Colorado Wage Act may file suit to recover wages or compensation owed. Any such action, however, must be filed within two (2) years of accrual, except that actions for willful violations may be commenced within three (3) years of accrual.

Attorneys’ Fees and Costs 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. If the employee claims more than $7500 and does not recover more than the amount tendered by the employer prior to trial, then the employer may recover its reasonable attorneys’ fees and costs.

Prohibited Retaliation Under The Colorado Wage Act

Employers are prohibited from intimidating, threatening, coercing, blacklisting, discharging or otherwise discriminating against any employee on the basis of having filed a complaint, instituted a proceeding or testifying 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 without a formal complaint being filed.