For all of those employers with employees based in Colorado, we wanted to update you on some sweeping changes to Colorado wage and hour laws that went into effect on March 16, 2020. As you know, employers generally must comply with both state and federal wage and hour laws—essentially meeting the requirements that are most protective of employees. To date in Colorado, the state law’s applicability has been limited—but that’s not going to be the case any longer.
The new law, known as the Colorado Overtime & Minimum Pay Standards (“COMPS”) Order #36, replaces all prior Colorado Minimum Wage Orders. The most significant changes include: (1) extending Colorado’s wage and hour laws to even more employers than before; (2) adjusting the salary thresholds required for eligibility under the federal overtime exemptions for executive, administrative, and professional employees; (3) changing employee rest period requirements and requiring meal periods; (4) clarifying the definition of “time worked” for purposes of being considered “compensable time”; (5) imposing new posting and distribution requirements that will require changes to employee handbooks; (6) creating new earnings statement requirements that may require payroll to update your earnings statements; and (7) modifying the calculation of overtime so that it is based not only on a weekly basis, but on a daily and consecutive hourly basis too. More details are below, and a copy of the COMPS Order can be found here.
1. Extending Colorado’s wage and hour laws to even more employers than before
Colorado’s prior wage orders applied to employers only in four industries: retail and service, food and beverage, commercial support service, and health and medical. The COMPS Order, however, applies to all private employers and employees working in Colorado. Employers and employees are exempt from the COMPS Order requirements only if specifically provided.
2. Adjusting the salary thresholds required for eligibility under the federal overtime exemptions for executive, administrative, and professional employees
The COMPS Order imposes a specific minimum salary threshold to maintain exempt status under these Fair Labor Standards Act (“FLSA”) exemptions. The minimum salary threshold will eventually far exceed the minimum salary required under the FLSA. Unless another exception applies (e.g., doctors, lawyers, and teachers, as set forth in detail in Rule 2.5.2 of the COMPS Order), the following schedule will dictate the minimum salary level that employers must pay to employees annually to satisfy the applicable exemption:
|Date||Annual Salary to Maintain Exempt Status Under FLSA|
|July 1, 2020||$35,568 (same as the current FLSA minimum)|
|January 1, 2021||$40,500|
|January 1, 2022||$45,000|
|January 1, 2023||$50,000|
|January 1, 2024||$55,000|
|January 1, 2025||To be adjusted by the same consumer price index (“CPI”) as the Colorado Minimum Wage|
Additionally, employees in “highly technical computer-related professions,” as defined by the COMPS Order, must receive at least the lesser of (1) the applicable salary above; or (2) hourly pay that is at least $27.63 in 2020, to be adjusted annually thereafter by the CPI.
3. Changing employee rest period requirements and requiring meal periods
Rule 5.1 of the COMPS Order states that employees are entitled to an uninterrupted and duty-free meal period of at least a 30-minute duration when the shift exceeds five consecutive hours. Employers are required, “to the extent practical,” to provide these meal periods “at least one hour after the start, and one hour before the end, of the shift.” If business circumstances require a meal period to be taken on-duty, then employees must be paid for such time.
Rule 5.2 sets forth very specific rest break requirements. Employers must “authorize and permit” paid 10-minute rest periods (subject to limited exceptions) for every four hours worked, or major fraction thereof, for all employees as follows:
|Work Hours||Rest Periods Required|
|2 or fewer||0|
|Over 2, and up to 6||1|
|Over 6, and up to 10||2|
|Over 10, and up to 14||3|
|Over 14, and up to 18||4|
|Over 18, and up to 22||5|
Rest periods may be reduced to five minutes so long as employers fulfill very specific requirements, such as obtaining a written agreement covering up to a one-year period. All rest periods should, “to the extent practicable,” be in the middle of each four-hour work period, and such rest periods are time worked for purposes of calculating minimum wage and overtime. A failure to authorize and permit an employee to take a 10-minute paid rest period is considered, under the COMPS Order, to be a failure to pay wages.
4. Compensable time
Because the FLSA notably does not define “compensable time,” the COMPS Order seeks to clarify the meaning of “time worked” by stating that certain activities explicitly do qualify as “time worked.” Rule 1.9 of the COMPS Order states that “time worked” includes, for example, the following tasks to the extent that they “take over one minute”: putting on or removing required work clothes or gear that are worn only on the job; receiving or sharing work-related information; security or safety screening; remaining at the place of employment awaiting a decision on job assignment or when to begin work; performing clean-up or other duties “off the clock”; clocking or checking in or out; or waiting to do any of these aforementioned tasks.
“Time worked” also includes certain travel time, including “employer-mandated transportation that (1) materially prolongs commute time or (2) in which employees are subjected to heightened physical risk compared to an ordinary commute.” Certain sleep time may also constitute “time worked.”
5. Posting and distribution in employee handbooks
The COMPS Order requires that all employers subject to it display a copy of the COMPS Order poster published by the Colorado Department of Labor and Employment’s Division of Labor Standards and Statistics (“DLSS”) in a conspicuous location. A copy of the DLSS poster can be found here. Penalties for failure to post are severe: failure to do so will render the employer ineligible to take “employee-specific credits, deductions, or exemptions” in the COMPS Order (e.g., a failure to post may defeat an employer’s classification of an employee as exempt under the administrative exemption), although employers will still be eligible for employer- or industry-wide exemptions (e.g., exemptions that exempt an entire industry from overtime or meal/rest periods).
Also, to the extent employers distribute any employee handbook or policies of any kind, those employers must include a copy of the COMPS Order or the abovementioned poster from the DLSS—as a result, you should include the poster (or Order) in your handbook. Employers who require handbook or policy acknowledgments to be signed by their employees must also require that their employees sign an acknowledgment of receiving the COMPS Order or DLSS poster, as applicable.
6. New earnings statement and recordkeeping requirements
The COMPS Order requires that employers issue earnings statements with the following information each pay period (in bold are the more burdensome requirements that may necessitate changes): (1) name, address, occupation, date of hire of the employee; (2) date of birth, if the employee is under 18 years old; (3) daily records of all hours worked; (4) record of credits claimed and of tips; (5) regular rates of pay, gross wages earned, withholdings made, and net amounts paid each pay period. Employers must also retain records of this information for three years after the employee’s wages are due, and for the duration of employment. Although we could not find definitive penalties that apply under the Order for record-keeping violations, we of course recommend compliance. Although the COMPS Order appears to require that this information be provided to each employee each pay period, some informal guidance from the Colorado agency indicates that it intended to ensure that this information is available to employees and the agency itself only upon request during an investigation, not included on pay stubs. We expect there will be additional guidance from the agency on this point (and others).
7. Overtime calculation
Employees will also be eligible for overtime pay not only for all hours worked over 40 in a workweek, but for daily and even consecutive hourly time. Employees are to be paid overtime at time and one-half of their regular rate of pay for work in excess of any of the following: (1) 40 hours per workweek; (2) 12 hours per work day; or (3) 12 consecutive hours without regard to the start and end time of the work day. Whichever of these three calculations results in the greater amount of wages will apply.
The COMPS Order is quite an overhaul of preexisting Colorado wage and hour laws, so please take the time to review its details and consider the necessary changes for your Colorado-based employees. We’re here to help if you need anything!