Colorado Wage Act

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iStock_000018764690_ExtraSmall.jpgAs of January 1, 2013, Colorado’s minimum wage increased from $7.64 per hour to $7.78 per hour, with tipped employee’s minimum wage increasing from $4.62 per hour to $4.76 per hour. The Colorado Division of Labor adopted Colorado Minimum Wage Order Number 29 (PDF) to reflect the new state minimum wage.  The Minimum Wage Order also provides important information about meal periods and rest breaks in Colorado.  

Where employees are covered by federal and Colorado state minimum wage laws, the employer must pay the higher minimum wage. Currently, the federal minimum wage is $7.25 per hour, which is lower than Colorado’s minimum wage of $7.78 per hour. Thus, beginning January 1, 2013, employers in Colorado must ensure all employees receive at least $7.78 per hour for all hours worked (or $4.76 per hour for tipped employees).

iStock_000017953455XSmall.jpgEffective January 1, 2012, Colorado’s minimum wage increased by $0.28, from $7.36 per hour to $7.64 per hour (for tipped employees, from $4.34 to $4.62).  This is $0.39 more than the federal minimum wage of $7.25 per hour.  

The new minimum wage requirement is set forth in Colorado Minimum Wage Order 28 (PDF) now in effect. Because employers in Colorado must comply with both federal (Fair Labor Standards Act) and state (Colorado Wage Act) laws, the higher prevailing wage must be paid to employees.

This $0.28 increase represents the 3.8% increase to the Denver-Boulder-Greeley Consumer Price Index (CPI) from 2010 to 2011. Colorado is one of eight states with a minimum wage tied to inflation. The other states include Arizona, Florida, Montana, Ohio, Oregon, Vermont, and Washington. Colorado’s inflationary adjustment requirement was passed by a relatively close vote on Amendment 42 to the Colorado Constitution in 2006 (823,526 in favor; 721,530 against).

According to the Bell Policy Center in Denver, and as reported by the Denver Post, this year’s minimum wage increase will affect 74,000 workers in Colorado, or 3.4% of Colorado’s workforce.  

More information about the 2012 Colorado minimum wage increase can be found on the Colorado Department of Labor website.

SnowDay.jpgI have received quite a few requests for inclement weather policies of late, and since the topic of “snow days” frequently arises this time of year, I wanted to provide some (hopefully) useful information for employers.  The question of whether an employer is obligated to pay employees for “snow days” depends largely on two questions:

  1. Is the employee exempt (salaried) or non-exempt (hourly)?
  2. Is the office open or closed? 

Is the Employee Exempt (Salaried) or Non-Exempt (Hourly)?

If an employee is exempt (i.e., employed in a bona fide executive, administrative, or professional capacity and paid on a salary basis of not less than $455 per week), then the general rule of thumb is that the employee must be paid his or her full salary for any week in which he or she performs any work, regardless of the number of days or hours worked.  Of course, there are certain exceptions to this general rule, including FMLA leave, the first or last weeks of employment, where no work is performed for an entire workweek, or, as discussed below, if the office is open and the exempt employee elects to not report to work for a full work day. 

If an employee is non-exempt (i.e., employed on an hourly basis and subject to the minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA)), the employee need not be paid for time not worked regardless of whether the office is open or closed. (Keep in mind that whether an employer is obligated under the law to pay and whether it should pay hourly employees to keep employees happy are separate issues).

Is the Office Open or Closed?

Next, the answer to the question of whether the office is open or closed, affects only exempt, salaried employees, as non-exempt, hourly employees need not be paid for time not worked.  If the office is open, but there is transportation difficulty, fear of driving in weather conditions, etc., causing an exempt employee to voluntarily elect not to come in at all, then the employer may deduct a “full day” absence from the employee’s salary. 

In the event the office is closed, meaning that the employer officially shut down operations due to inclement weather or other emergency and told folks to go home or not come in at all, the employer is still obligated to pay all exempt, salaried employees their full salary.  Simply put, no deductions can be made if exempt employees are “ready, willing and able to work,” but there just happens to be no work available. 

Finally, a couple of caveats:

  • Employers must always be mindful of the “full day” rule.  If an exempt, salaried employee is voluntarily absent from work for a partial day or for 1 1/2 days, the employer cannot deduct for any partial day absence and can only deduct for an actual “full day” missed.  Again, a “full day” deduction, however, is only permissible if the office is open and the employee voluntarily elects to stay home.  It is not proper to make a “full day” deduction if the office is officially closed, as the employee has no choice in the matter.
  • Likewise, while there is no prohibition on employers asking both exempt and non-exempt employees to use personal, sick or vacation time for missed hours or days due to a “snow day,” in no event should an exempt, salaried employee’s time be treated as unpaid when the office is officially closed (even if an employee has no accrued time off benefits). 

Example: Jane is a salaried employee.  ABC Company decides to officially close the office due to a blizzard and notifies all employees to either not come in at all or to leave early.  ABC Company’s policy is that employees must apply PTO time to the time missed, but Jane took a trip to Aruba recently and is currently out of accrued PTO time.  Even though she has no accrued time off, ABC Company still must pay Jane for the “snow day.”

The information above is in line with two opinion letters issued by the Department of Labor on the proper payment of wages under the FLSA when inclement weather occurs: Opinion Letter FLSA2005-41, October 24, 2005 and Opinion Letter FLSA2005-46, October 28, 2005.  Note that the DOL has announced that it will no longer issue Opinion Letters; however, existing Opinion Letters still serve as interpretative guidance absent a subsequent Administrative Interpretation providing otherwise.

Inclement Weather Policy

Lastly, should employers have an inclement weather policy in place?  YES.  Employees and management alike are well-served with a clearly drafted policy on how the company will compensate its employees for “snow days.”  Here is a sample inclement weather policy: Sample Policy.pdf with the footnote that it should be used as an example only.  Given the various nuances discussed above and with the FLSA generally, any inclement weather policy should be carefully drafted according to a company’s specific needs and reviewed by competent employment counsel before being adopted and distributed to employees.

Happy New Year!  I know I am more than happy to say goodbye to 2010, am looking forward to all the possibilities of 2011, and hope that anyone taking the time to read my blog is also off to a good start this new year.

On this First Monday of 2011, Colorado employers take note:

  1. The new Colorado minimum wage increased to $7.36 per hour effective January 1, 2011 (with tipped employees at $4.34/hour) – a $0.12 increase from the last change to Colorado’s minimum wage as of January 1, 2010 ($7.24) and $0.11 more than the federal minimum wage effective July 24, 2009 ($7.25).  When both the federal Fair Labor Standards Act and a state law apply, the higher standard must be observed.  Ergo, Colorado employers must ensure all non-exempt, hourly employees are making at least $7.36 per hour as of the start of 2011. 
  2. The Payroll Tax Holiday of 2011 begins.  This is part of the new tax deal that Congress and President Obama put through in December to extend Bush-era tax cuts through 2012.  In addition to extending unemployment benefits, the new deal provides that employee side payroll tax contributions for Social Security taxes will be reduced by 2% (up to $106,800).  So, instead of seeing withholdings of 6.2% of wages for Social Security, employees should see more money in their paychecks with a lesser withholding of only 4.2% (employers still have to pay their 6.2%).  TaxGirl explains this change nicely on her blog.
  3. The Colorado Supreme Court did not issue any opinions this First Monday of 2011, but denied certioriari in 29 cases (PDF). 
  4. Ellen Golombek is named the new Executive Director of the Colorado Department of Labor and Employment under Governor-Elect John Hickenlooper.  Golomobek is the former (and first woman to serve as) President of the Colorado AFL-CIO, a former Government Affairs Assistant with the Service Employees International Union, and most recently, served as the Colorado State Director for America Votes, a voter-rights organization.  As exemplified by Senate Minority Leader Mike Kopp’s comments:

“Governor-elect Hickenlooper’s appointment to the Department of Labor may certainly take some of the air out of the bipartisan atmosphere he has promised to promote as Governor. His selection of a noted progressive activist and union boss in Ms. Golombek certainly will raise plenty of eyebrows in Colorado’s business community. And for good reason.”

this appointment is proving to be rather controversial.

On October 28, 2010, in Carruthers v. Carrier Access Corporation, the Colorado Court of Appeals affirmed a district court’s discretionary award of attorney fees in favor of a prevailing employer in a Colorado Wage Act case.  This is a significant ruling interpreting the 2007 amendments to the Colorado Wage Act, C.R.S. 8-4-101 et seq. (PDF).

When the Colorado Wage Act was amended in 2007, it imposed greater penalties against employers for the non-payment of wages and provided that attorney fee awards were to be discretionary when they were previously mandatory.  Many (myself included) believed that the attorney fee amendments would be interpreted similar to the standard for attorney fee awards under Title VII of the Civil Rights Act of 1964, such that prevailing employees would generally be awarded attorney fees, but prevailing employers could only get them if the employee’s claim was frivolous.  This belief was due, in large part, to the legislative declaration for the amendments which provides:

Section 1. Legislative declaration. (1) The General Assembly hereby finds, determines, and declares that the wage claim statute should be amended to create greater incentives for employers to promptly pay wages and other compensation owed to current and former employees.

(2) The General Assembly intends the change to a discretionary standard for awards of attorney fees and costs to be interpreted consistently with the courts’ interpretation of the attorney fee provisions in the federal Civil Rights Act of 1964, 42 U.S.C. sec. 2000e…

However, the Colorado Court of Appeals in Carruthers first noted that the statute is clear and unambiguous as it states that a court “may” award costs and attorney fees to a prevailing employer or employee.  As such, no review of extrinsic evidence is required to find that an attorney fee award under the Colorado Wage Act is discretionary as to both parties.  Nonetheless, the Court of Appeals performed a legislative history analysis, and noted the revisions to another section of the declaration, Section 3:

(3) Attorney fees awarded against an employee are not intended to impose an excessive financial hardship.

According to the Court of Appeals, the revisions to Section 3 helped to clarify that while there is an intent to treat prevailing employees as presumptively entitled to attorney fee awards and that awards of fees against unsuccessful employees should not impose excessive financial hardship, there is no intent to limit attorney fee awards to prevailing employers only in cases involving frivolous claims.  The Colorado Court of Appeals also noted that no witness at the legislative hearings testified that an employer could only be awarded attorney fees if the employee’s claim was frivolous, and further distinguished wage claims from discrimination claims by explaining that an employee in a discrimination case is acting as a “private attorney general” versus an employee in a wage case who is seeking to recover earned wages or compensation similar to a private contractual claim.

Finally, the Colorado Court of Appeals provided a guideline of factors for courts to consider when awarding discretionary attorney fees to prevailing employers under the Colorado Wage Act:

  1. The scope and history of the litigation;
  2. The ability of the employee to pay an award of fees;
  3. The relative hardship to the employee of an award of fees;
  4. The ability of the employee to absorb the fees it incurred;
  5. Whether an award of fees will deter others from acting in similar circumstances;
  6. The relative merits of the parties’ respective positions in the litigation;
  7. Whether the employee’s claim was frivolous, objectively unreasonable, or groundless;
  8. Whether the employee acted in bad faith;
  9. Whether the unsuccessful claim was based on a good faith attempt to resolve a significant legal question under the Wage Act; and
  10. The significance of the claim under the Wage Act in relation to the entire litigation.

The underlying facts for this case involve the plaintiff, Philip Carruthers, who sued his former employer, Carrier Access Corporation, for $210,000 in unpaid commissions that neither the judge nor the jury found to be supported by the evidence.  After a hearing on attorneys’ fees, the trial court awarded Carrier $94,798.92 in defense fees, which was later reduced to $34,000.  Although the Court of Appeals affirmed an attorneys’ fee award in favor of Carrier, it vacated the $34,000 award and remanded the case back to the district court to issue factual findings in support of a reasonable amount of Carrier’s fees incurred in defending the wage claim.

Bottom Line: This is a favorable case for companies defending wage claims greater than $7,500 as it allows a discretionary attorney fee award under the Colorado Wage Act – a law that otherwise carries with it a big hammer against employers.