Colorado Wage Act

Colorado Wage Act

The Colorado Wage Act requires employers to pay wages to employees in accordance with the compensation agreement in a timely manner. 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.”

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 an 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.  

Coverage Under The Colorado Wage Act

The Colorado Wage Act covers only “employers” and “employees.” The term “employer” has the same meaning as set forth in the federal “Fair Labor Standards Act,” 29 U.S.C. § 203. 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. 

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 person and the degree to which the person 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 does not have 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, 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.”

Examples of compensation covered by the Wage Act are salary, hourly rates, overtime pay, commissions, bonuses and vacation.  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.  

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 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 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 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;
  • 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 shall 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 treble the amount wrongfully withheld (in addition to the withheld compensation), plus attorneys’ fees and costs. 
  • 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 amounts for money or property that the employee failed to properly pay 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. 

Nothing in this section authorizes a deduction 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.  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.

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.

Civil Theft Remedy Authorized by Colorado Wage Act

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 C.R.S. 18-4-401 (the criminal theft statute) if an employer or the employer’s agent willfully refuses to pay wages or compensation, or falsely denies 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.   

Wage Complaints with the Colorado Division of Standards

The Wage Act establishes a detailed procedure for the Colorado Department of Labor and Employment (CDLE) to investigate and adjudicate 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.

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 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.

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 $7,500.00 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 if a formal complaint has not been filed.

Assistance Available from Baird Quinn’s Employment Lawyers

Baird Quinn’s Denver labor and employment lawyers are available to assist employers and workers in addressing issues under the Colorado Wage Act. We represent clients in Colorado Division of Labor investigations, negotiations, and litigation under the Colorado Wage Act.