Wage And Overtime Matters
Every employer is required to follow statutes and regulations under both federal and state laws that govern the payment of wages and overtime. The main laws governing Colorado employers are the Fair Labor Standards Act (“FLSA”), Colorado COMPS No. 38, and the Colorado Wage Act. These laws are complex and their application often depends on the unique circumstances of the employer and employee.
The Fair Labor Standards Act
Under the FLSA, virtually all employers must pay non-exempt employees a minimum wage at the statutory rate, pay overtime compensation at one and one-half times the regular rate of pay for all hours worked over 40 in a workweek, and pay all employees the same wage without regard to race, national origin, gender and other protected characteristics. You can find a more detailed summary of the FLSA at the following link: FLSA Overview
FLSA Issues Leading to Litigation
The following are recurring issues under the FLSA often at issue or leading to court litigation or agency action:
1. The Exemption Status of Employees
Employers must pay overtime compensation to “non-exempt” employees. Employers are not required to pay overtime compensation to “exempt” employees, such as executives, professionals, certain administrative employees, some computer specialists, farm employees, and apprentices.
Employers often face significant liability due to their misapplication or other failure to properly apply exemptions under the FLSA. The FLSA exemptions for executives, administrative, and professional employees – as well as other FLSA exemptions — are discussed in more detail on the following page: FLSA White Collar Exemptions
2. Misclassifying Employees as Independent Contractor
The line between “employees” and “independent contractors” is not always clear. For example, whether a worker is an employee or an independent contractor if usually dependent upon the analysis of multiple factors – some of which may suggest the worker is properly categorized as an independent contractor, while other factors suggest employee status. Further, different laws often emphasize different factors in determining whether a worker is an employee or independent contractor.
Employers who misclassify workers as independent contractors face stiff potential penalties under numerous laws, including the FLSA, Affordable Care Act, and Colorado Misclassification of Employees as Independent Contractors Act. As a misclassification may also lead to the denial of multiple employment benefits to workers (such as minimum wage, overtime, health insurance, 401(k) benefits), it may also be actionable in a private individual or class action against an employer. As a result, it is critical that employers properly classify employees to avoid significant potential liability under a variety of state and federal laws.
You can find additional information about independent contractor classification issues at this link: Independent Contractor Classification Issues
3. Failing to Pay for “Off the Clock” Time
Employers often face potential FLSA liability for failing to pay employees for “off the clock” time at work. Non-exempt employees may clock in and begin work before their scheduled shift start time or work beyond the end of their scheduled shift. In some instances, employers reduce the employees’ time to the scheduled work hours – even though they actually worked more. Whether accomplished through manual or automated adjustments to the time-keeping system, these practices deprive employees of pay for hours worked and normally violate the FLSA.
Employers may also improperly classify certain time as “non-compensable time” and advise employees that they may not clock in or report work time until certain tasks are completed. Common examples involve employees turning on their computers, putting on uniforms, or getting equipment needed for work. These practices are also problematic under the FLSA as depriving employees of pay for compensable work time under the FLSA.
4. Meals and Break Time Violations
Employees who work more than five (5) hours per day are entitled to an uncompensated meal period of at least thirty (30) minutes. Employees are typically required to clock out and back in for the 30-minute meal period. If employers require employees to work during their meal period, they must compensate them for the work time. While these practices may seem minor, they can lead to significant liability under the FLSA and are often challenged through class actions.
5. The Myth of “Comp” Time
Sometimes employers seek to avoid paying overtime by granting employees other benefits, such as “compensatory time” instead of pay for overtime hours worked or “averaging hours” from week to week. Even if requested or agreed to by the employee, however, the FLSA does not allow private employers to give non-exempt employees compensatory time in lieu of pay at the overtime rate for overtime hours worked or move hours around between weeks or pay periods to reduce potential overtime liability.
6. Other Excuses for Not Making Payment as Required by the FLSA
Employers also sometimes do not pay any wages at all, claiming that they do not have the money or that the employee has lost his or her right to be paid for some other reason. This violates Colorado state law and may also violate the minimum wage provisions of the FLSA. In other cases, employers do not pay full wages to employees or pay below minimum wage when the wages for the week are averaged. This is almost always an illegal wage violation under the FLSA.
7. Employees may not “waive” their rights under the FLSA
It does not matter that an employee agreed to work for less than minimum wage or to forego overtime compensation — employees cannot waive their rights under the FLSA. Even if an employer strikes a “deal” with an employee – which purports to excuse the employer from paying overtime or even wages to the employee – the employer still has to pay wages at the statutory rate. The FLSA does not allow employers to enter into waiver agreements with employees to forego their statutory rights. If the employer allows an employee to work, it must then pay the employee in accordance with the FLSA requirements.
8. Employee Remedies Under the FLSA
Under the FLSA, , employees may file a private suit against their employer for unpaid overtime or minimum wage violations. If they prevail, employees may recover minimum wage/overtime owed, plus “liquidated” damages for “willful violations.” A willful violation also extends the FLSA statute of limitations from two (2) to three (3) years. Finally, prevailing employees are entitled to recover their reasonable attorney’s fees and costs, so that the employer, not the employee, pays for the employee’s legal services.
COMPS ORDER NO. 38
COMPS Order No. 38 (7 CCR § 1103-1) is a Colorado law setting forth wage rights and responsibilities, including minimum wage obligations, overtime pay for work over 40 hours in a workweek or 12 hours in a day, meal and rest breaks, limitations on wage deductions, and more.
COMPS Order No. 38 applies to all employers in Colorado in any industry that meets the definition of employer under the FLSA. The FLSA defines an employer as “any person acting directly or indirectly in the interest of an employer in relation to an employee.”
1. Minimum Wage Requirements
COMPS Order NO. 38 sets forth the Colorado Minimum Wage ($13.65/hour, or $10.63 for tipped employees), in 2023. The minimum wage is adjusted annually due to account for inflation. All non-exempt employees must be paid the minimum wage, regardless of whether they are paid by the hour, salaried or commissioned. COMPS No. 38 also provides that if other laws have a higher hourly rate (i.e., Denver’s minimum wage), the higher rate will apply.
2. Overtime Requirements
COMPS No. 38 requires that overtime be paid to non-exempt employees at the rate of one and one-half times the regular pay rate for all time worked over 40 in a workweek and over 12 in a workday. Employers may not provide Comp time in lieu of overtime. There are some exemptions/variances from the overtime pay requirements for certain positions – including some health care jobs, heavy vehicle drivers and sky industry positions.
3. Meal Periods/Rest Periods
Employers must provide meal periods of at least 30 minutes uninterrupted and duty-free, to employees for shifts over 5 hours. The meal periods may be unpaid if the employees are completely relieved of all work duties, and allowed to pursue personal activities during the meal period. If work makes uninterrupted meal periods impractical, eating on duty must be permitted, and the time must be paid. Employers are also required to provide employees with rest periods of 10 minutes, paid, every 4 hours, preferably close to the middle of the four-hour work period.
4. Time Worked
COMPS Order No. 38 defines the work time for which employee must be compensated. It provides that all time on-premises, on duty, or at workplaces is work time, including time:
- Putting on/removing work clothes/gear, cleanup/setup, or other off-clock duty;
- Waiting for assignments at work, or receiving or sharing work-related information;
- security/safety screening, or clocking/checking in or out; or
- Waiting for any of the above tasks.
Travel for the benefit of the employer is also time worked, although normal commute time to and from work is not. Sleep time, if sufficiently uninterrupted and lengthy, can also be excluded in certain situations.
5. Deductions, Credits, Charges, & Withheld Pay
Employees must be paid their final paycheck immediately if they are terminated, and at the next regular pay date if they resign. Departing employees must also be paid all accrued and unused vacation pay, including paid time off usable for vacation, without deducting or declaring forfeiture based on cause for termination, lack of resignation notice, etc.
Deductions from pay are allowed if listed below or in C.R.S. § 8-4-105 (including deductions required by law, in a written agreement for the benefit of the employee, for theft identified in a police report, or for property loss after audit/notice).
Meal credits/deductions are allowed for the cost or value (without employer profit) of voluntarily accepted meals. Lodging credits/deductions are allowed if housing is voluntarily accepted by the employee, primarily for the employee’s (not the employer’s) benefit, recorded in writing, and limited to $25 or $100 per week (based on housing type). Uniforms must be provided at no cost unless they are ordinary clothes without special material or design. Employers must also pay for any special cleaning required for uniforms, and cannot require deposits or deduct for ordinary wear and tear.
6. Colorado Minimum Wage Requirements for Tipped Employees
The Colorado Minimum Wage Order also regulates the wage treatment of tipped employees, with provisions requiring a minimum wage that must be paid exclusive of tips, regulations for tip sharing, and the deduction of credit card processing fees from tipped employees’ income. While Colorado law permits employers to pay a lower minimum wage to tipped employees, it also requires that the employer follow certain conditions to qualify for this “tip credit.” COMPS Order No. 38 also regulates how tips are paid and distributed.
7. Exemptions from COMPS Order No. 38
Certain categories of workers are exempt from COMPS Order No. 38, including executives/supervisors, administrators, and professionals paid at least a salary of $50,000 in 2023 ($55,000 in 2024), and employees paid highly technical computer work and paid $31.41 per hour. Also exempted are other highly compensated, non-manual-labor employees paid at least 2.25 times the above salary ($112,500 in 2023), 20% owners, or the highest-paid/highest-ranked employee at a nonprofit, if actively engaged in management. Various (not all) types of salespersons, taxi drivers, camp/outdoor education field staff, or property manager may also be exempt.
8. Complaint and Anti-Retaliation Rights
Employee can report violations of COMPS Order No. 38 to the Colorado Department of Labor or file lawsuits in court to address their complaints. Employers are prohibited from retaliating against, or interfering with, employees exercising their rights under COMPS Order No. 38. Owners and other individuals with control over work may be liable for certain violations — not just the business, even if the business is a corporation, partnership, or other entity separate from its owner(s). Immigration status is irrelevant to these labor rights: the Division will not ask or report status in investigations or rulings, and it is illegal for anyone to use immigration status to interfere with these rights.
Colorado Wage Act
The Colorado Wage Act requires Colorado employers to pay employees their earned wages in a timely manner. Generally, if an employer ends the employment relationship, an employee’s wages must be paid no later than twenty-four (24) hours after the end of the employment relationship (except for commissions). If an employee ends the employment relationship, the employee must be paid no later than the next regularly scheduled payday.
The Colorado Wage Act also regulates deductions from wages, vacation pay, commissions, bonuses, final pay, pay periods and paydays, and pay statements. The Colorado Wage Act is covered in detail at the following link: See Colorado Wage Act
Employers are prohibited from retaliating against employees for pursuing claims or exercising their rights under the Colorado Wage Act. In the event an employee is discharged for seeking payment of agreed upon wages or otherwise pursing a claim under the Colorado Wage Act, the employee may have an actionable wrongful discharge or retaliation claim against the employer.
Baird Quinn’s FLSA and wage and hour attorneys have extensive experience navigating the complex landscape of the FLSA, COMPS Order No. 38 and the Colorado Wage Act. We can assist you with overtime or wage and hour issues, including:
- Understanding the requirements of the FLSA, COMPS Order No. 38 and Colorado Wage Act
- Determining whether employees are exempt from coverage because they are covered by the professional, managerial, administrative or other applicable exemptions
- Counting work hours for compensation purposes under the FLSA or COMPS Order No. 38
- Calculating overtime compensation
- Analyzing FLSA and state law issues in specific industries, such as the restaurant and auto industries
- Auditing wage and hour practices to avoid significant potential liability under the FLSA and Colorado state laws.
In addition, Baird Quinn’s employment attorneys have substantial experience representing clients in cases involving:
- Alleged refusal to pay minimum wages
- Alleged failure to pay for all overtime worked or payments at less than the required amount
- Alleged payments with goods or services instead of money
- Alleged failure to pay commissions for sales made during the employment relationship
- Alleged failure to pay bonuses or other forms of incentive compensation
Our FLSA and wage and hour attorneys offer compliance assistance and regularly represent clients in administrative and court litigation under the FLSA, COMPS Order No. 38 and Colorado Wage Act. Baird Quinn regularly represents clients throughout the State of Colorado, including the metro-Denver area. Please feel free to contact us for a confidential consultation regarding your wage and hour matter.
If you would like additional information regarding our Denver wage and hour lawyers, please contact Baird Quinn LLC online or call (303-813-4500) today to discuss your Colorado minimum wage or overtime matters.