Colorado Employer's Law Blog

Colorado Employer's Law Blog

An Employer's Guide Through the Twists and Turns of Employment Law and Litigation, Including Collective and Class Actions.

BREAKING NEWS: Nationwide Injunction Blocks the U.S. DOL’s Final Rule That Nearly Doubled the Minimum Salary for Exempt “White Collar” Employees

Posted in Fair Labor Standards Act, Human Resources, Misclassification

Breaking news text with world and hand cursorOn Tuesday afternoon, a federal judge for the U.S. District Court in the Eastern District of Texas (Sherman Division) entered a preliminary injunction in State of Nevada et al. v. United States Department of Labor et al., Civil Action No. 4:16-CV-00731, blocking the U.S. Department of Labor’s Final Rule, which would have increased the minimum salary for “white collar” exempt employees from $455 per week ($23,660 annually) to $921 per week ($47,892 annually) and created an automatic update mechanism to adjust the minimum salary level every three years. The Final Rule was to be effective on December 1, 2016.

Case Background

Earlier in 2016, Nevada and twenty (20) other U.S. states filed a lawsuit against the U.S. Department of Labor (“DOL”), the Wage and Hour Division of the DOL, and their agents, challenging the legality of the DOL’s authority to enact the Final Rule. On October 12, 2016, the States filed an Emergency Motion for a Preliminary Injunction. Amicus briefs were filed and a preliminary injunction hearing was held last week on November 16, 2016.

Preliminary Injunction Entered

U.S. District Judge Amos L. Mazzant entered a 20-page Order granting the States’ Motion for a Preliminary Injunction and enjoining the DOL from

“implementing and enforcing the following regulations as amended by 81 Fed. Reg. 32,391: 29 C.F.R. §§ 541.100, 541.200, 541.204, 541.300, 541.400, 541.600, 541.602, 541.604, 541.605, and 541.607 pending further order of this Court.”

In short, the Court preliminarily blocked the DOL’s Final Rule from taking effect this year, which would have set a new minimum salary threshold for exempt, salaried employees. The lawsuit is still pending and the states will likely request that the preliminary injunction be made permanent, while the DOL will likely appeal the entry of the injunction to the Fifth Circuit Court of Appeals.

Today’s Order follows two other recent federal court Orders out of Texas blocking government agency actions directed by the Obama administration. See Texas v. United States, No. 7:16-cv-54, N.D. Tex., Aug. 21, 2016 (issuing a nationwide injunction to ban enforcement of a Department of Education rule related to transgender bathroom policies) and Nat’l Fed’n of Indep. Bus. v. Perez, No. 5:16-cv-66, N.D. Tex., June 21, 2016 (issuing a nationwide injunction to bar implementation of the DOL’s “Advice Exemption Interpretation”).

No Looming December 1, 2016 Deadline

Government and private business employers now have a reprieve (at least temporarily, and perhaps permanently) from the looming December 1, 2016 deadline that was sure to increase labor costs for businesses of all sizes, including costs of defending claims and lawsuits associated with non-compliance (knowingly or unknowingly) related to overtime pay and/or classification of salaried, exempt “white collar” employees under the new Final Rule.

Colorado Employer’s Law Joins Nationwide Lawsuit Against U.S. Government As Administration Expands Its War on Privacy

Posted in Employment Counsel, Human Resources

Colorado Employer’s Law, a member of the Worklaw® Network, a nationwide affiliation of independent law firms practicing labor and employment law – joined in the filing today of a lawsuit (PDF) against the U.S. Department of Labor and Secretary Thomas Perez to block the federal government’s illegal intrusion into private conversations regarding employment, labor and HR matters between attorneys and employers. Under a new Interpretation of current “persuader rule” law released by the Department on March 23, 2016, the government will now require vast numbers of employers and attorneys in America to disclose confidential information — including the nature of conversations, copies of representation agreements, the amounts of fees paid, and other details – about employment, labor and HR-related legal matters. The rule requires disclosure of advice provided after June 30, 2016.

“As counselors to the business community here in Denver we are taking a stand to protect employers’ rights to seek advice and assistance in confidence, and keep government out of employer conversations with their attorneys,” said Jennifer Gokenbach, the founding attorney of Colorado Employer’s Law. “Without a doubt, this is the single-most important regulatory threat to every American company today, and we will join in leading the fight to block the government’s irresponsible attack on these freedoms.”

Under rules in place for decades, based on the bedrock principle of attorney-client privilege, employers have been free to seek legal assistance and consultation on labor and employment matters without fear of government intrusion into private conversations. This new Interpretation will force the disclosure of confidential attorney-client information.

The Interpretation is an election year favor to organized labor, a favor that violates the First Amendment because it is designed to suppress speech that opposes unions. The breadth of the Department’s Interpretation means that almost any common employment question or HR advice could trigger disclosure to the government. For instance, under the interpretation, attorneys and employers will now be left questioning whether they have to submit a report to the Department every time the attorneys perform innocuous HR-related activities such as editing an employee handbook, consulting with an employer about an employee complaint, planning an employee-satisfaction survey, or revising content for employees on an employer’s website.

If attorneys or employers “guess wrong,” the consequences are harsh—jail time and fines for attorneys and employers are possible consequences under the law.

The Department’s reinterpretation also violates the Regulatory Flexibility Act, which requires the government to conduct detailed cost-benefit analyses studies of new regulations on small businesses. The Department estimated the impact of its change on small business at $826,000 annually, a figure that the Department of Labor’s former Chief Economist, Diana Furchtgott-Roth, calculates as woefully inadequate given the expansive scope of the regulation and impact on vast numbers of employers in America.

“Complying with the proposed rule could cost establishments about $9 billion in the first year and about $5.5 billion in subsequent years, for a ten-year cost of $60 billion,” Furchtgott-Roth concluded in a January 2016 report for The Manhattan Institute. “The Department should have examined what the cost would be if all potentially affected employers and advisers were to file. This would have provided an honest assessment of the potential effect of the proposed rule.”

The Department’s failure to properly take into account how this reinterpretation would impact small business owners is a glaring omission and another reason to set the regulation aside.

Worklaw® Network’s lawsuit, which was filed in the United States District Court for the District of Minnesota (PDF), seeks to stop and overturn the Department of Labor’s unconstitutional reinterpretation of the “advice exception” in Section 203(c) of the Labor Management Reporting and Disclosure Act, 29 USC 433(c).

Gokenbach Law, LLC d/b/a Colorado Employer’s Law is based in Denver, Colorado. It is a member of Worklaw® Network, a nationwide affiliation of independent law firms practicing management-side labor and employment law, with member firms, attorneys or affiliates in 27 U.S. states, Australia, Canada, China, India, Germany, and Mexico.

Colorado Supreme Court Rules Medical Marijuana Use Is Not Lawful Off-Duty Conduct

Posted in Background Checks, Disability, Drug Testing Policies, Human Resources, Medical Marijuana

On June 15, 2015, in a 6-0 opinion, the Colorado Supreme Court provided its long-awaited ruling in Coats v. Dish Network, LLC (PDF). The Court affirmed the Colorado Court of Appeals’ decision below, and held that because marijuana is a Schedule I banned substance under federal law, it is not a “lawful” off-duty activity under Colorado law. Therefore, employers such as Dish Network, LLC may terminate employees who test positive for tetrahydrocannabinol (“THC”), a component of marijuana, in violation of a company’s drug policy.

Facts of Case

Brandon Coats, a quadriplegic who is confined to a wheelchair, worked for Dish Network, LLC from 2007 to 2010 as a telephone customer service representative. In 2009, Mr. Coats obtained a “Red Card” from the Colorado Department of Public Health & Environment to use medical marijuana to treat his painful muscle spasms. Consistent with his use license and state law, Mr. Coats uses medical marijuana at home and after work hours.


Brandon Coats, pictured above, is a quadriplegic who uses medical marijuana to control his painful muscle spasms. (Photo Credit: NY Times)

Dish Network has a zero tolerance drug policy and tests its employees both as a condition of hire and on a random basis during employment. In May 2010, Mr. Coats was selected for random drug testing. His test came back positive for THC and, even though he disclosed his “Red Card” and explained that he only used medical marijuana after hours for medical purposes, Dish Network terminated Mr. Coats’ employment for a violation of the company’s drug policy.

Mr. Coats brought a wrongful termination in violation of public policy claim against Dish Network pursuant to Colorado’s Lawful Activities Statute, C.R.S. 24-34-402.5, which prohibits employers from terminating an employee based on his or her “lawful activities” off premises and during non-working hours. Mr. Coats argued that his use of medical marijuana was “lawful” under Colorado’s Medical Marijuana Amendment (PDF), passed in 2000, and that he should not have been fired.

Dish Network filed a motion to dismiss at the trial court level, arguing that because medical marijuana use is not a “lawful” activity under federal law, it is not a “lawful” activity under Colorado’s Lawful Activities Statute. The trial court agreed with Dish Network and dismissed Mr. Coat’s lawsuit. Mr. Coats appealed.

The Colorado Court of Appeals, in a split 2-1 decision (Webb, J., dissenting), affirmed the trial court’s decision, finding that medical marijuana use is still prohibited by federal law and thus, it is not a “lawful” activity for purposes of Colorado’s Lawful Activities Statute. Mr. Coats appealed to the Colorado Supreme Court.

Making Sense of Today’s Holding

To better understand the Court’s decision (which has many people scratching their heads from a practical perspective), we must look at the precise questions certified by the Colorado Supreme Court on appeal:

1.  Does Colorado’s Lawful Activities Statute, C.R.S. 24-34-402.5, protect employees from discretionary discharge for lawful use of medical marijuana outside the job where the use does not affect job performance?

HOLDING: No, the term “lawful” in Colorado’s Lawful Activities Statute, C.R.S. 24-34-402.5(1), must be broadly construed to mean lawful under both state and federal law. Since the federal Controlled Substances Act designates marijuana as a Schedule I controlled substance, meaning it has no medical accepted use, a high risk of abuse, and a lack of accepted safety for use under medical supervision, the use of marijuana, medical or otherwise, remains a federal criminal offense and is not “lawful.”

Following Judge Webb’s dissent in the Colorado Court of Appeals’ decision, Mr. Coats argued that the term “lawful” under Colorado’s Lawful Activities Statute should be construed more narrowly and should only mean lawful under Colorado state law. However, the Colorado Supreme Court disagreed, and held that it could find nothing to support that the General Assembly intended Colorado’s Lawful Activities Statute to be so narrowly interpreted.

2.  Does Colorado’s Medical Marijuana Amendment make the use of medical marijuana “lawful” and confer a right to use medical marijuana to persons lawfully registered with the state?

HOLDING: The Colorado Supreme Court declined to address this second question. I was very curious as to how this second certified question would be answered, as, in my view, it is a far broader question than the first and had implications regarding the practical conflict between state and federal laws regarding marijuana use. Unfortunately, however, the practicalities and inherent questions that arise when state voters are passing laws to legalize marijuana, yet existing federal law prohibits any and all use, live on on for another day.

In short, unless and until the federal government removes marijuana from its list of Schedule I controlled substances, an employer in Colorado may terminate employees who test positive for THC, even if the use of marijuana is off-duty, for medical purposes, and consistent with state law.

Food For Thought: Cocaine is listed as a Schedule II substance as it has been found to have an accepted medical use with a valid prescription.

U.S. Supreme Court Reverses 10th Circuit in EEOC v. Abercrombie Hijab Case

Posted in Discrimination, Human Resources, Title VII

On June 1, 2015, in an 8-1 decision, the United States Supreme Court reversed the Tenth Circuit Court of Appeal’s decision in favor of Abercrombie & Fitch in EEOC v. Abercrombie & Fitch Stores, Inc. (PDF) — a case involving a failure-to-accommodate religious discrimination claim under Title VII of the Civil Rights Act of 1964.

Case Facts

Image Credit: The Becket Fund for Religious Liberty

Image Credit: The Becket Fund for Religious Liberty

In 2008, Samantha Elauf (pictured on right) was 17 years old when she applied for a job as a “floor model” (i.e., sales associate) at the Abercrombie & Fitch Kids store in her local mall in Oklahoma.  She is a practicing Muslim and wears a headscarf (also known as a “hijab”) daily.  Ms. Elauf wore Abercrombie-like clothes (jeans and a t-shirt) and a black headscarf to her interview.

The store’s assistant manager interviewed Ms. Elauf, liked her, and recommended that she be hired, giving her interview ratings of 2 out of 3 in all of Abercrombie’s core competencies of “outgoing and promotes diversity,” “sophistication and aspiration,” and “appearance and sense of style.” However, the assistant store manager was concerned that Ms. Elauf’s headscarf may violate the company’s Look Policy.  Abercrombie had a written Look Policy that prohibited, among other things, “models” from wearing “caps” or black clothing.  Importantly, during the interview, there was no discussion of Ms. Elauf’s religion or headscarf, nor was there any discussion of the “no caps” or “no black clothing” specifics of the Look Policy.

The assistant store manager assumed Ms. Elauf wore the headscarf due to her Muslim religious beliefs and, consistent with company policy, sought assistance from her district manager with respect to the Look Policy.  It is unclear why the district manager did not contact Abercrombie’s Human Resources department or Abercrombie’s legal counsel for guidance.  Instead, he recommended that the assistant store manager not hire Ms. Elauf because he interpreted Ms. Elauf’s headscarf to violate the Look Policy’s prohibition on “caps.” He also recommended that the assistant store manager change Ms. Elauf’s interview rating with respect to “appearance and sense of style” from a 2 to a 1, thereby disqualifying her from employment. Per the district manager’s directive, the assistant store manager threw away her original interview rating sheet and completed a new sheet with the lower rating. After changing her interview rating, the assistant store manager did not offer Ms. Elauf a job with Abercrombie. One of Ms. Elauf’s friends, who also worked at the Abercrombie Kids store, told her that she was not hired because she wore a headscarf.

Ms. Elauf thereafter filed a Charge of Discrimination with the Equal Employment Opportunity Commission (“EEOC”). The EEOC found probable cause for the Charge, decided to litigate the claim (a relatively rare occurrence), and filed a lawsuit in federal court against Abercrombie on behalf of Ms. Elauf. On July 13, 2011, the District Court for the Northern District of Oklahoma granted summary judgment in favor of the EEOC and Ms. Elauf on the issue of liability, and the case went before a jury to decide damages.  After a trial, the jury awarded Ms. Elauf $20,000 in compensatory damages.

Abercrombie appealed the district court’s grant of summary judgment to the Tenth Circuit Court of Appeals, which, on October 1, 2013, reversed the entry of judgment in favor of the EEOC and Ms. Elauf and reversed the denial of summary judgment to be in favor of Abercrombie. The EEOC and Ms. Elauf then appealed the Tenth Circuit’s decision to the United States Supreme Court.

The U.S. Supreme Court reversed the Tenth Circuit Court of Appeals, and sent the case back to the trial court to determine whether Ms. Elauf’s religion was a “motivating factor” in the decision not to offer her employment.

Holding & Key Take-Aways

In today’s opinion (PDF), the U.S. Supreme Court held that Title VII requires only a showing that an employee’s or applicant’s protected status (here, religion), whether confirmed or otherwise, be a “motivating factor” in an employer’s decision not to accommodate, rejecting the Tenth Circuit’s holding that an employer must have “actual knowledge” of the need for an accommodation before liability attaches.  Ms. Elauf’s case was reversed and remanded back to the Tenth Circuit for further consideration. In its earlier decision, the Tenth Circuit attempted to create a bright line test involving “actual knowledge” in failure-to-accommodate Title VII cases.  But, it seems that the facts of this case and the Tenth Circuit’s approach were much like trying to fit a square peg in a round hole.

Take-Away #1: Title VII Prohibits Employment Decisions “Motivated” by Discriminatory Animus.

Common-SenseThis, to me, is a very common sense take-away.  In this case, it was undisputed that the interviewing manager assumed Ms. Elauf was Muslim and would need to wear her headscarf to work.  Thus, even though Ms. Elauf did not expressly state her religion or request an accommodation to allow her to wear a headscarf, there was evidence of the potential need to accommodate based on religion to allow this case to survive summary judgment.  Indeed, the assistant store manager contacted her district manager for the very purpose of discussing the applicant’s headscarf, her underlying belief that Ms. Elauf wore the headscarf due to her Muslim religion, and whether it conflicted with Abercrombie’s Look Policy.

Reversing the Tenth Circuit’s requirement that an employer have “actual knowledge” of a need for an accommodation, the majority of the U.S. Supreme Court instead held that Title VII prohibits employment decisions “motivated” by a desire not to accommodate, and contrasted Title VII claims with ADA disability discrimination claims involving an employer’s failure to reasonably accommodate an applicant’s known physical or mental limitations.  The Court wrote: “[m]otive and knowledge are separate concepts;” and, Title VII contains no knowledge requirement.

Take-Away #2: Religion Must Be Given Favored Treatment in Failure-to-Accommodate Cases.

commonsenseThis take-away is not so common sense to me. Specifically, the Court also held that, because Congress defined “religion” in Title VII to “include all aspects of religious observance and practice, as well as belief,” religious practices must therefore be given “favored” treatment in failure-to-accommodate cases.  The “favored” treatment involves allowing a Title VII failure-to-accommodate religious discrimination claim based on a company policy to be brought as an individual disparate-treatment claim versus a disparate-impact claim. Abercrombie argued that the Look Policy was facially neutral since it theoretically prohibited all headwear, regardless of religion, and thus, the EEOC should have brought a disparate-impact claim instead of a disparate-treatment claim. Justice Thomas, who dissented to the majority’s opinion, agreed with Abercrombie on this point. He stated that there are only 2 causes of action under Title VII – (1) a disparate-treatment, or intentional discrimination, claim and (2) a disparate-impact claim. Because the EEOC did not bring a disparate-impact claim in this case, Justice Thomas would affirm the judgment of the Tenth Circuit.

Take-Away #3: The Case Is Not Over.

Since the “motivations” of Abercrombie’s management (district manager and/or assistant store manager) are central to whether Abercrombie unlawfully discriminated against Ms. Elauf in this Title VII failure-to-accommodate religious discrimination case, further proceedings are necessary to determine whether Abercrombie’s decision not to hire Ms. Elauf was motivated, even in part, by her religious practice and the desire not to accommodate such practice. Because individual “motivations” are inherently subjective and generally hinge on a credibility determination, this case will likely need to go to a trial on the issue of liability (unless it settles of course, which it probably should under these facts and with this holding).

What Can Employers Learn from this Decision?

Looking at the facts and holding of this decision, employers are wise to:

  1. TRAIN, RE-TRAIN and TRAIN AGAIN all managers and supervisors on the company’s policies and procedures, including compliance with all applicable federal, state and local anti-discrimination laws. Abercrombie apparently had a policy that if there are issues or questions about the Look Policy or if an employee requests a religious accommodation, the manager should contact the Human Resources Department and/or their direct supervisor, but only the HR Department could grant an accommodation. This process unfortunately did not happen in this case. Managers and supervisors are a company’s front line when it comes to both exposing and protecting a company from employment claims, but managers and supervisors are not usually HR specialists or employment lawyers. They need periodic reminders about the right steps to take and clear directives about who to talk to when certain issues arise.
  2. NEVER MAKE ASSUMPTIONS WHEN MAKING EMPLOYMENT DECISIONS involving individuals and protected classes. Abercrombie claimed that it trains store managers “never to assume anything about anyone” in a job interview, and not to ask applicants about religion, yet it had two levels of management that made assumptions that got it into trouble. When protected classes are involved (race, gender, age, sexual orientation, religion, disability, national origin, etc.), any assumptions — whether good or bad, or right or wrong — can be an employer’s worst enemy. Go back to number 1 above.
  3. BE CONSISTENT. Abercrombie’s Human Resources Department had previously approved numerous exceptions to its Look Policy. In particular, the evidence showed that since 2001, it had granted 8 or 9 headscarf exceptions, and various other exceptions for religious reasons, including allowing facial hair, bracelets, long skirts, and yarmulkes. Inconsistently applied policies and procedures give rise to employment claims and make Plaintiff’s lawyers happy. Go back to number 1 above.
  4. Don’t be afraid to ENGAGE IN THE INTERACTIVE PROCESS when presented with a scenario involving a potential protected class and a conflict with company policy. Does this mean that employers should just ask all applicants who wear headscarves or religious garb about their religion during an interview? No. How about we just bury our heads in the sand and ignore protected class issues altogether? Still no. Similar to the standard question on most job applications regarding whether an applicant can perform all of the essential functions of a job with or without reasonable accommodation, when dealing with strict dress code policies that may impact religious beliefs, an employer should present the policy in question to the applicant and find out whether they are able to comply with the policy with or without accommodation. This allows the interactive dialogue to take place between the applicant and prospective employer, so that any protected status issues can be dealt with appropriately.
  5. If a company really needs a strict dress code policy that does not allow for any accommodations (although not recommended by this lawyer), CONDUCT CONCRETE STUDIES OR PROVIDE SPECIFIC EXAMPLES before implementing the policy to show that alterations or accommodations will negatively affect the brand or cause an undue burden. Abercrombie only had its expert’s opinion, who was hired after the lawsuit was filed, to testify that exceptions to its Look Policy would negatively impact its multi-million dollar brand and sales. Everybody knows – judges in particular – that experts are hired guns, and without more, an expert opinion alone is not going to prove up actual damage to a brand or a decrease in sales to justify a strict, no-accommodation policy.
  6. Finally, if questions arise, BE PROACTIVE AND TALK WITH HUMAN RESOURCES OR EMPLOYMENT COUNSEL. HR folks really do know a thing or two. One can only wonder if Abercrombie’s HR department had just been consulted before any hiring decision was made, then perhaps Abercrombie and the EEOC (funded by taxpayers) might have saved hundreds of thousands of dollars in attorney’s fees, notwithstanding 7+ years of litigation stress for everyone involved.

Colorado Supreme Court Provides Clarity On Independent Contractors

Posted in Colorado Employment Security Act, Human Resources, Independent Contractor, Misclassification, Unemployment Insurance

On Tuesday, May 13, 2014, the Colorado Supreme Court issued two decisions that provide a glimmer of hope for businesses waging the war with state government agencies over the classification of workers as independent contractors.

The cases are:

  1. Industrial Claim Appeals Office v. Softrock Geological Services, Inc. et al. (involving the classification of 1 geologist)
  2. Western Logistics, Inc. d/b/a Diligent Delivery Systems v. Industrial Claim Appeals Office et al. (involving the classification of 220 delivery drivers)

Both cases involve whether an individual is an “independent contractor” under the Colorado Employment Security Act, C.R.S. 8-70-115. Both cases arose as a result of audits conducted by the Colorado Division of Employment and Training (aka Division of Unemployment Insurance). And, both cases originally found the businesses to be liable for unemployment compensation premiums due. In other words, for the most part, the Division (the auditor, the Hearing Officer(s) and/or the Industrial Claim Appeals Office) found that the workers in question should be classified as employees, and therefore, the companies owed back taxes for unemployment insurance premiums, interest, and going forward contributions. The businesses appealed.

The Colorado Supreme Court Decisions

In two en banc decisions (meaning all judges sat for the decisions), the Colorado Supreme Court remanded to the Colorado Court of Appeals and/or returned Softrock and Western Logistics back to the Division for proceedings consistent with the Court’s holding that there is no dispositive single factor or set of factors to determine whether a worker is engaged in an independent trade or business under the Colorado Employment Security Act. Rather, the answer to the question of “independent trade” can only be resolved by applying a “totality of the circumstances” test that evaluates the particular set of circumstances and dynamics of the relationship between the worker and the company engaging the services.

The factors for evaluation include, but are not limited to, the 9 factors set forth in the statute:

[Whether the employer:]

  1. Require[s] the individual to work exclusively for the person for whom services are performed; except that the individual may choose to work exclusively for the said person for a finite period of time specified in the document;
  2. Establish[es] a quality standard for the individual; except that [the employer] can provide plans and specifications regarding the work but cannot oversee the actual work or instruct the individual as to how the work will be performed;
  3. Pay[s] a salary or hourly rate but rather a fixed or contract rate;
  4. Terminate[s] the work during the contract period unless the individual violates the terms of the contract or fails to produce a result that meets the specifications of the contract;
  5. Provide[s] more than minimal training for the individual;
  6. Provide[s] tools or benefits to the individual; except that materials and equipment may be supplied;
  7. Dictate[s] the time of performance; except that a completion schedule and a range of mutually agreeable work hours may be established;
  8. Pay[s] the individual personally but rather makes checks payable to the trade or business name of the individual; and
  9. Combine[s] [the employer’s] business operations in any way with the individual’s business, but instead maintains such operations as separate and distinct.

And, other factors, such as whether the worker:

  1. Maintains an independent business card, listing, address, or telephone;
  2. Has a financial investment such that there was a risk of suffering a loss on the project;
  3. Uses his or her own equipment on the project;
  4. Sets the price for performing the project;
  5. Employs others to complete the project; and
  6. Carries liability insurance.

And still, other factors, including a “wide array of factors” related to the parties’  actual relationship, rather than a “rigid check-box type inspection.”

The Division has relied for many years on a strict, 2-factor analysis to determine the classification or misclassification of a worker: (1) whether the worker is free from “control and direction” in the performance of his/her services; and (2) whether the worker is “customarily engaged in an independent trade, occupation, profession, or business related to the service performed.”  The “control and direction” factor remains intact.  However, the “independent trade” factor used to mean that the Division would find a misclassified employee in any situation where a worker did not perform the same type of services for others as an independent contractor during the period in question. Now (as aptly and reasonably pointed out by the Colorado Supreme Court), such reliance by the Division on a single-factor test for the “independent trade” element “unfairly subjects the employer to a hindsight review of whether the putative employee engaged in other work during the period in question and does not consider the myriad of reasons that an independent contractor might not engage in other employment despite being free to do so.”

What Does This Mean for Businesses Going Forward?

Although good news, these cases still emphasize that the evaluation of worker classification issues in Colorado remains complex.  Employers should work with their legal counsel to analyze worker classifications, and if employees are improperly classified as independent contractors, any misclassifications should be remedied as soon as possible.  Colorado is one of a handful of states that have signed on to partner with the United States Department of Labor to combat, what the government views, as businesses improperly misclassifying employees as independent contractors.  Colorado also has passed its own law that authorizes the Division to conduct audits and investigations of complaints and to fine employers up to $5,000 per misclassified employee for the first misclassification with willful disregard and up to $25,000 per misclassified employee for subsequent misclassifications.

The clarified test under Colorado law is, thankfully, far less rigid than its past application and should be conducted going forward on a case-by-case basis applying a “wide array of [relevant] factors.” Future case law will likely provide further guidance on the applicability of the factors under different circumstances. For now, businesses in Colorado can breathe a collective sigh of relief that the Colorado Supreme Court has, at least, provided clarity (and a much needed voice of reason) on the proper analysis of independent contractors under the Colorado Employment Security Act.

Colorado Discrimination Claims Soon To Be More Treacherous For Employers

Posted in Disability, Discrimination, Human Resources, Retaliation

Treacherous.jpgFive years in the making (previously introduced without success in 2009, 2010, 2011, and 2012), the Job Protection and Civil Rights Enforcement Act of 2013 (HB 13-1136) (PDF) was introduced again this year in the House on January 18, 2013, and took less than five months to pass through both branches of the Colorado legislature and get signed into law by the Governor on May 6, 2013, despite considerable opposition from business groups.

Effective January 1, 2015, the Job Protection and Civil Rights Enforcement Act of 2013 significantly amends the Colorado Anti-Discrimination Act (CADA) to allow for the recovery of compensatory and punitive damages and prevailing plaintiff attorneys’ fees, among other changes, in employment discrimination cases brought under Colorado state law.

Regardless of size, small employers (defined as less than 15 employees) and large employers (more than 15 employees) should be aware of the changes to CADA and implement proactive steps to help minimize the increased exposure to future CADA claims.

What is CADA and What Are the Amendments?

The Colorado Anti-Discrimination Act (CADA) was enacted in 1957 and prohibits discrimination in the workplace based on race, color, disability, gender, sexual orientation (including transgender status), national origin, ancestry, religion, creed, and age. Where Title VII of the Civil Rights Act of 1964 applies to employers with 15 or more employees, CADA applies to Colorado employers of any size. CADA is also broader than Title VII because it prohibits discrimination based on age, disability and sexual orientation, which are not protected classes under Title VII (although age is protected under the Age Discrimination in Employment Act, and disability, under the Americans With Disabilities Act).

Prior to the enactment of the Job Protection and Civil Rights Enforcement Act of 2013, a successful CADA plaintiff could only be awarded the following equitable relief:

  • Reinstatement;
  • Back Pay;
  • Front Pay; and
  • Interest on Back Pay.

The recently passed CADA amendments will allow successful plaintiffs to recover the above remedies, plus the following enhanced remedies:

  • Compensatory Damages (e.g., future pecuniary loss, emotional distress, suffering, inconvenience, mental anguish, loss of enjoyment of life);
  • Punitive Damages; and
  • Attorneys’ Fees.

To recover compensatory damages, a CADA plaintiff must show that he or she was the victim of intentional discrimination in the workplace. To recover punitive damages, a CADA plaintiff must show with “clear and convincing evidence” that the discriminatory practice was done with “malice or reckless indifference to the rights of the plaintiff.” However, a court will take into consideration the size and assets of a company, as well as the egregiousness of the intentional discrimination. Moreover, similar to Title VII, the CADA amendments will allow prevailing plaintiffs to recover their attorneys’ fees and costs. As for prevailing defendant-employers, they may only recover their attorneys’ fees if the action by the plaintiff is proven to be frivolous, groundless or vexatious – a difficult bar to reach.

Fortunately, the CADA amendments will provide caps on compensatory and punitive damage awards (also similar to Title VII, and incorporating the limits of Title VII for employers with 15 or more employees):

  • For employers who employ 1 to 4 employees, the total of both compensatory and punitive damages cannot exceed $10,000;
  • For employers who employ 5 to 14 employees, the total of compensatory and punitive damages cannot exceed $25,000;
  • For employers who employ 15 to 100 employees, the total of compensatory and punitive damages cannot exceed $50,000;
  • For employers who employ 101 to 200 employees, the total of compensatory and punitive damages cannot exceed $100,000;
  • For employers who employ 201 to 500 employees, the total of compensatory and punitive damages cannot exceed $200,000; and
  • For employers who employ 501 or more employees, the total of compensatory and punitive damages cannot exceed $300,000.

Beyond expanding the remedies for CADA claims, the amendments also eliminate the age limit on age discrimination claims in Colorado.  Previously, CADA only prohibited discrimination based on age if a plaintiff was older than 40, but less than 70 years of age.

What Are the Practical Impacts? 

Risks Ahead.jpgBecause the amendments allow individuals to recover compensatory and punitive damages and attorneys’ fees (for example, against a small business owner in Colorado that employs 1 employee), the number of CADA claims are going to increase. Unfortunately, the cost of defending one CADA lawsuit, even if frivolous, could be enough to put a small business out of business.

In addition, the CADA amendments mean more state court employment litigation, which is more treacherous for employers. Traditionally, federal courts will weed out threadbare claims more readily than state courts and also tend to be more employer-friendly.

Also, when only equitable relief was available, CADA claims by themselves went before judges. Now, CADA claims will go before juries in Colorado, since compensatory and/or punitive damages will likely be sought in most, if not all, future CADA complaints.

Finally, as there is new exposure to punitive damages with respect to CADA claims, businesses (particularly, small businesses) have no guaranteed way to protect against such a loss through insurance. The public policy of Colorado prohibits an insurance carrier from providing insurance coverage for punitive damages. See Universal Indemnity Ins. Co. v. Tenery, 39 P.2d 776, 779 (Colo. 1934); Lira v. Shelter Ins. Co., 913 P.2d 514 (Colo. 1996). As a result, a small business accused of a CADA violation faces a dire situation with defense costs alone, let alone the potential risk of an uninsurable award of punitive damages.

What Should Colorado Employers Do?

As Colorado state law employment claims under CADA will be more lucrative for plaintiffs and plaintiff’s lawyers, and will very likely increase in number, employers of all sizes are wise to:

  1. Implement effective policies prohibiting discrimination, harassment and retaliation in the workplace;
  2. Conduct training for all managers and supervisors (at a minimum) to promote awareness and teach them how to take prompt, appropriate action when potential discrimination, harassment and/or retaliation arises;
  3. Audit employment practices to identify problem areas; and
  4. Evaluate whether it makes financial sense to purchase Employment Practices Liability Insurance (EPLI) to provide protections and cover defense costs should a claim arise.

Effective written policies, EEO and harassment training, and periodic self-audits are evidence of good faith compliance efforts that could successfully eliminate any risk for punitive damages.

Last but not least, the Job Protection and Civil Rights Enforcement Act of 2013 only applies to causes of action that accrue after January 1, 2015 — so, at least there is time to get ready.

Colorado is the Ninth State To Restrict Use of Credit History in Employment Decisions

Posted in Background Checks, Human Resources

Pen Signing.jpgOn April 19, 2013, Governor John Hickenlooper signed into law SB 13-018, otherwise known as “the Employment Opportunity Act.” The Employment Opportunity Act prohibits employers from obtaining and using consumer credit information for employment purposes unless the credit information is “substantially related” to the position. 

Currently, there are only 8 other states where employment protections have been adopted for individuals who may have fallen on hard economic times, including California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Vermont, and Washington.   

Colorado employers must comply with the Employment Opportunity Act on or before its effective date of July 1, 2013. Violators will be subject to Department of Labor investigations and civil penalties up to $2,500 per violation.

For more information on the Colorado Employment Opportunity Act and how to comply, see my prior posts here and here.

Employers: Are You Using the Right I-9, FMLA and FCRA Forms?

Posted in Background Checks, Human Resources


iStock_000017765581_ExtraSmall.jpgEmployers take note of a slew of employment law changes in 2013, including new I-9 forms, new FMLA posters and forms, and new FCRA forms.  

New I-9 Forms

Effective May 7, 2013, new Employment Eligibility Verification Form I-9s are required. The new forms are available from the U.S. Citizenship and Immigration Services website at: The new I-9 form was published on March 8, 2013 and must be in place and used by employers starting in May 2013.    

New FMLA Poster & Forms

Effective March 8, 2013, employers must post the new Family and Medical Leave Act (FMLA) poster and use updated FMLA notice and certification forms. The Department of Labor’s (DOL) model forms can be found on the DOL website at:

To learn more about the changes, the DOL Wage and Hour Division posted a side-by-side comparison of the current and final regulations at:

New FCRA Forms & Enforcement Agency

As of January 1, 2013, for employers who use a third party service to conduct background checks on applicants or employees, 3 notices required under the Fair Credit Reporting Act (FCRA) changed:

  1. Summary of Consumer Rights;
  2. Notice to Users of Consumer Reports of their Obligations; and 
  3. Notice to Furnisher of Information of Their Obligations.  

The new forms are available at: In addition, the Consumer Financial Protection Bureau (CFPB) has become the new enforcement agency for the FCRA (previously, the responsible agency was the Federal Trade Commission). Both private individuals and the CFPB can bring claims for negligent violations of the FCRA seeking damages and attorneys’ fees, as well as wilful violations, which expose employers to statutory damages in the amount of $100-$1,000 per violation, attorneys’ fees and punitive damages. 


The Aye’s Have It – Colorado’s Civil Union Act Signed Into Law & Employment Opportunity Act Passed in Both Senate and House

Posted in Background Checks, Discrimination, Human Resources


While many Coloradoans are taking advantage of their last few ski days of the season, the Colorado legislature has been busy passing new, groundbreaking legislation with respect to civil unions and the use of individual credit histories in employment decisions. How will this new legislation affect employers? Read on.

Colorado Civil Union Act

On March 21, 2013, Governor John Hickenlooper signed the Colorado Civil Union Act (SB13-011) (PDF) into law, authorizing 2 unmarried adults, regardless of gender, to enter into a civil union.

Effective May 1, 2013, among other rights, benefits and protections, the Colorado Civil Union Act provides that parties to a civil union in Colorado are granted the following:

  • Dependent coverage under health insurance policies for plans issued, delivered, or renewed on or after January 1, 2014;
  • Dependent coverage under life insurance for plans issued, delivered, or renewed on or after January 1, 2014;
  • Prohibitions against discrimination based upon spousal status;
  • Survivor benefits under and inclusion in workers’ compensation laws;
  • The right of a partner in a civil union to be treated as a family member or as a spouse under the “Colorado Employment Security Act” for purposes of unemployment benefits;
  • Eligibility for family leave benefits;
  • The ability to insure a party to a civil union under group benefit plans for state employees;
  • The ability to designate a party to a civil union as a beneficiary under the state public employees retirement SB13-01 system;
  • Survivor benefits under local government firefighter and police pensions;
  • Protections and coverage under domestic abuse and domestic violence laws; and
  • The ability to file a claim based on wrongful death, emotional distress, loss of consortium, dram shop, or other laws, whether common law or statutory, related to or dependent upon spousal status.

CBS 4 Denver reported on the signing of this historical legislation in Colorado, and also discussed that there are many supporters of same sex marriage who believe that the Civil Union Act was passed too soon in Colorado and will create complications involving 2 separate and unequal classes of citizens (i.e., same sex couples in a “civil union” and those in a “marriage”). The United States Supreme Court is currently hearing arguments on the constitutionality of the 1996 Defense of Marriage Act (DOMA), which is certain to have an impact on Colorado’s new law.

Employment Opportunity Act

On March 25, 2013, the House passed its Third Reading of the Employment Opportunity Act (SB13-018) (PDF), which sets forth the permissible use of credit information with regard to hiring and other employment decisions. I previously posted a summary of the Employment Opportunity Act, which affects all employers in Colorado with 4 or more employees.

Now that the Employment Opportunity Act has passed the Senate and the House, the bill will briefly go back to the Senate (where the bill originated) to approve the amendments by the House. If the Senate accepts the changes, which is anticipated, it goes to the Governor to be vetoed or signed into law. Will the Governor sign the Employment Opportunity Act into law? It is likely not a matter of if but when, and all signs point to the final stamp of approval soon since the Act’s effective date is July 1, 2013.

By the way, if anyone is interested to see how a bill becomes law in Colorado, the Colorado Legislative website has published a fantastic flow chart (PDF) regarding the legislative process.

What Should Employers Do Now?

Small, medium and large sized businesses/employers must be aware of these new rights, benefits and protections that go into effect May 1, 2013 (Civil Union Act) and July 1, 2013 (Employment Opportunity Act). Steps should be taken to modify benefit policies and enrollment forms relating to individuals in civil unions for Colorado plans issued or renewed on or after January 1, 2014. In addition, employers are wise to dust off and review their employment policies to ensure all written policies are fully compliant with these and all other applicable new laws.

Last but not least, do not hesitate to engage competent employment counsel, before a claim arises, so that you are properly informed of and can stay on top of the ever-changing laws, rules and regulations affecting employment in Colorado.

Colorado’s Employment Opportunity Act Resurfaces And Picks Up Steam

Posted in Background Checks, Human Resources, Restrictive Covenants

iStock_000017567956_ExtraSmall.jpgPercolating since last year, Colorado’s Employment Opportunity Act has resurfaced in early 2013 and may be on the road to passage.  Known as SB13-018, or Senate Bill 18, the Employment Opportunity Act recently passed its third reading in the Senate on February 12, 2013 (final vote, 20 in favor: 15 opposed) and now is before the House. Employers take note – if passed, the Employment Opportunity Act WILL affect the use of credit checks in employment decisions in Colorado, from hiring decisions to running background checks on existing employees.

What Is the Employment Opportunity Act?

The Employment Opportunity Act sets forth the lawful purposes for which an employer or a potential employer may use consumer credit information (consumer credit reports and credit scores).  Employers who violate the Employment Opportunity Act may be subject to civil penalties in the amount of $2,500 per violation.  Aggrieved employees or prospective employees will be able to file complaints with the Department of Labor.  The Department of Labor will be authorized to conduct investigations, hold hearings, and award civil penalties against employers.

Among other things, the Employment Opportunity Act:

  • Prohibits an employer’s use of consumer credit information for employment-related decisions unless the employer is a bank or financial institution, the credit report is required by law, or if the information is “substantially related” to the job.
  • “Substantially related” to the job means that the position or prospective position is one of “executive or management personnel or officers or employees who constitute professional staff to executive and management personnel” and the position involves one or more of the following duties:
    1. Setting the direction or control of a business, division, unit, or an agency of a business;
    2. A fiduciary responsibility to the employer;
    3. Access to customers’, employees’ or the employer’s personal or financial information other than information customarily provided in a retail transaction;
    4. The authority to issue payments, collect debts, or enter into contracts; or
    5. Involves contracts with defense, intelligence, national security, or space agencies of the federal government.

Employment attorneys in Colorado know that the definition of “executive or management personnel or officers or employees who constitute professional staff to executive and management personnel“, a phrase taken directly from Colorado’s statute regarding non-competition agreements (C.R.S. 8-2-113), has yet to be clearly defined by Colorado courts in non-compete cases.  If the Employment Opportunity Act is passed as currently drafted, it appears that Department of Labor Hearing Officers (not judges or lawyers) may get to chime on who constitutes this elusive category of employees.

The full text of the Employment Opportunity Act is available here: Senate Bill 18.pdf.

What Employers Must Comply?

The Employment Opportunity Act would apply to “employers” as defined by Colorado Revised Statute, Section 8-1-101, and also “prospective employers,” which is not defined.  Pursuant to C.R.S. 8-1-101, an “employer” means:

  • The state, and each county, city, town, irrigation, and school district therein, and all public institutions and administrative boards thereof having 4 or more employees;
  • Every person, association of persons, firm, and private corporation, including any public service corporation, manager, personal representative, assignee, trustee, and receiver, who has 4 or more persons regularly engaged in the same business or employment, except as otherwise expressly provided in this article, in service under any contract of hired, expressed or implied.
  • Note that an “employer” is not an employer of private domestic servants or farm and ranch labor, nor employers who employ less than 4 employees in the same business, or in or about the same place of employment.  The definition also excludes any state or local law enforcement agency.

Presumably, a “prospective employer” would be an employer considering a new applicant that otherwise fits the definition above.  Hypothetically, however, if you regularly employ 3 employees, just hired a 4th and are considering a 5th, may you be properly excluded?  Without a definition of “prospective employer,” it is not entirely clear.

What’s Next?

If passed, the Colorado Employment Opportunity Act could be effective as early as July 1, 2013 and would apply to any acts related to the use of credit checks after that date.

We will monitor the status of this new legislation affecting employers in Colorado and will post an update with more information as it becomes available. Stay tuned.