TO AVOID WAGE ACT PENALTIES, AN EMPLOYER SHOULD MAKE PAYMENT TO AN EMPLOYEE WITHIN FOURTEEN DAYS OF A WAGE ACT DEMAND BEING SENT TO THE EMPLOYER.
The Colorado Wage Act requires that, when an employee has been involuntarily terminated, wages or other compensation that are “earned, vested, determinable, and unpaid at the time of such discharge” are due and payable “immediately.” C.R.S. § 8-4-109(1)(a). If an employer fails to pay wages due, the employee may make a written demand for payment. C.R.S. § 8-4-109(3)(a).
Under the Wage Act, if the employer fails to make payment of earned, vested and determinable wages within fourteen days after the written demand is sent, the employer is liable to the employee for the wages or compensation and a mandatory penalty. C.R.S. § 8-4-109(3)(b). The penalty is calculated as follows: (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, 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%. C.R.S. § 8-4-109(3)(c). An employee may file suit on the penalties alone. See C.R.S. § 8-4-109(3)(d)(II) (“The employee or his or her designated agent may commence a civil action to recover the penalty set forth in this subsection (3)”); see also Balducci v. Congo, Ltd., 2019 U.S. Dist. LEXIS 127745 (May 29, 2019 D. Colo)(employer’s failure to tender any payment after wage demand letter sent entitled employee to mandatory statutory penalties).
Section 8-4-109(3)(a.5) of the Wage Act provides that, if an employer disputes the amount of wages or compensation claimed by an employee and, if within fourteen days after the written demand is sent, the employer makes a “legal tender” of the amount that the employer in good faith believes is due, the employer shall not be liable for any penalty unless, in a legal proceeding, the employee recovers a sum greater than the amount so tendered.
The term “legal tender” is not defined by the Wage Act, and some employers have argued that the term merely requires the employer to make an unconditional offer to pay the employee within fourteen days – as opposed to actually making payment of amounts owed to the employee. Several arguments are available to employees to counter this argument. First, Black’s Law Dictionary defines “legal tender” as “[t]he money (bills and coins) approved in a country for the payment of debts, the purchase of goods, and other exchanges for value.” Black’s Law Dictionary (11th Ed. 2019). Other major dictionaries provide similar definitions of “legal tender.” See, e.g., “Legal Tender” Merriam-Webster 2020, https://www.merriam-webster.com (accessed Feb. 4, 2020)(“money that is legally valid for the payment of debts and that must be accepted for that purpose when offered”). This definition suggests that “legal tender” requires the actual payment of wages owed, not a mere promise to make payment.
Second, a court’s “primary duty in construing statutes is to give effect to the intent of the General Assembly, looking first to the statute’s plain language.” Vigil v. Franklin, 103 P.3d 322, 327 (Colo. 2004). As applied to this issue, it is widely understood that the Wage Act is a comprehensive statute designed to protect an employee’s right to be paid wages and compensation owed. See, e.g., Montemayor v. Jacor Comms., Inc., 64 P.3d 916, 923 (Colo. App. 2002). As such, its provisions are construed liberally to protect employees’ right to payment. See Id; see also Fang v. Showa Entetsu Co., Ltd., 91 P.3d 419, 421 (Colo. App. 2003). “The basic design of the Colorado Wage Claim Act is to … make all earned but unpaid employee wages and compensation – that are due and payable – available to the employee immediately upon termination of the employment relationship.” Leonard v. McMorris, 63 P.3d 323, 329-30 (Colo. 2003); see also Fang, 91 P.3d at 421 (“The purpose of the [Wage Act] is to ensure that wages are paid in a timely manner and to provide adequate judicial relief in the event wages are not paid); see also Barnes v. Van Schaack Mortgage, 787 P.2d 207, 209 (Colo. Ct. App. 1990) (same). The remedies and penalties exist to address an employer’s non-compliance with that purpose. See Leonard, 63 P.3d at 329-30. Thus, the comprehensive statutory scheme of the Wage Act is to get employees paid in a timely manner and to subject employers to penalties when they do not. Examined in this context, the most reasonable meaning of “legal tender” under C.R.S. § 8-4-109(3)(a.5) is one that would lead to an employee actually getting paid as quickly as possible and subjecting the employer to penalties where that does not happen. Thus, “legal tender” must be more than an offer to pay, it must be an offer to pay coupled with actual, immediate production of payment. It would undermine this obvious intent of the Wage Act to allow an employer to avoid penalties by simply promising to make payment at some point in the future.
Third, reading the statute as a whole buttresses this argument. The term “legal tender” appears twice in C.R.S. § 8-4-109. It appears in the language at issue, but also in another subsection, C.R.S. § 8-4-109(3)(d)(II). The latter section addresses, in relevant part, filing wage claims in small claims court and states “[i]f an employer makes a legal tender of the full amount claimed in the action within fourteen days after service of the complaint … , the employee shall dismiss the action.” See Id. Viewed in light of that language, the most reasonable interpretation of “legal tender” in § 8-4-109(3)(d)(II) is an offer to pay coupled with the actual, immediate production or payment of the thing owed. Anything less would mean that the Wage Act requires an employee to dismiss a suit based merely on a promise or an offer rather than payment. Not only is that inconsistent with how litigation generally works, but if an employer failed to follow through, the employee would have to initiate another action and pay additional fees to file again, all while out his or her wages. Given the statutory scheme to get employees timely payment of their wages, here “legal tender” must mean actual production or payment. As statutes are to be construed harmoniously, “legal tender” must have the same meaning in the language at issue in C.R.S. § 8-4-109(3)(a.5). In addition, in subsection (3)(a.5), if “legal tender” was interpreted to mean less than actual payment or production (e.g., an offer or promise) then an employer could avoid both paying the wages throughout the litigation and the penalties by merely offering a sum to be paid; only if the claimant recovered an amount at trial greater than the offer would the employer be subject to penalties. This cannot be the intent.
These are only some of the arguments supporting an interpretation that the term “legal tender” requires an employer to actually make payment to an employee within fourteen days to avoid penalties under the Wage Act. As a result, a mere promise to pay does not guarantee an employer that litigation and penalties will be avoided. Thus, in order to avoid any possibility of Wage Act penalties, employers should pay all compensation believed to be due within the fourteen day period, and not merely offer to make such payment.
Baird Quinn’s Denver employment attorneys represent employers and employees on issues under the Colorado Wage Act. If you have any questions about the Colorado Wage Act, please feel free to contact us.