Sweeping Changes Made to Colorado Wage Orders

The Colorado Department of Labor and Employment (“Department”) adopted the Colorado Overtime & Minimum Pay Standards Order #38 (COMPS), the 2022 PAY CALC Order and updated its Wage Protection Rules on Nov. 10, 2021 with effective dates of Jan. 1, 2022.

The new final rules for 2022 make multiple changes that include:

• Expanding forfeiture of accrued "PTO"
• Updating calculations of regular rates of pay for overtime and paid sick leave
• Increasing minimum wage and salary thresholds
• Changing exemptions to minimum wage and overtime

Eliminating Forfeiture of Accrued "PTO"

Colorado’s existing Wage protection Rule 2.17 does not permit employee forfeiture of accrued vacation pay. The newly adopted Wage protection Rules (7 CCR 1103-7) for 2022 have updated the definition of "vacation pay" to include "pay for leave, regardless of its label, that is usable at the employee's discretion". While this definition does not include leave for specific purposes such as illnesses, holidays or bereavement, it does include broader paid time off (PTO) policies.

Whether or not an employer chooses to offer vacation pay or PTO to its employees is still the employer's choice in Colorado. However, if these types of leave are provided to employees on an accrual basis, the amount of leave earned may not be forfeited.

Updated Rate Calculations for Overtime and Paid Sick Leave

COMPS Order #38 includes two options for calculating the regular rate of pay for overtime purposes for an employee who works multiple jobs for one employer at different hourly rates.

• Weighted average: Determined by adding all wages earned and dividing that amount by the total number of hours worked in the workweek. This is consistent with the Fair Labor Standards Act.
• Rate of job performed during overtime hours: The employee's hourly rate of pay for the job being performed during overtime hours.

Weighted average if the default method for calculating regular rate for overtime purposes with the other method only permitted if there is a written agreement between the employee and the employer.

Colorado's Healthy Families and Workplaces Act (HFWA) took effect in 2021, establishing state-mandated paid sick leave. The new Wage Protection Rules have provided detail on how the pay for sick leave under HFWA is to be calculated. The HFWA pay rate when an employee takes sick leave is like a weighted average calculation. However, there are a few key differences; First, bonuses do not need to be included in the HFWA rate calculation. Second, the rate is determined based on the employee's pay over the 30 calendar days prior to taking leave, not a workweek.

These are only two examples. It is important to note that Colorado has multiple calculations for determining an employee's regular rate of pay depending on the purpose.

Increased Minimum Wage and Exemption Thresholds

As of Jan. 1, 2022, the Colorado minimum wage will increase from $12.32 to $12.56 per hour. More details on this and other minimum wage levels such as tipped employees, minors and agricultural range workers will be available annually in the Publication and Yearly Calculation of Adjusted Labor Compensation (PAY CALC) Order. This order lists values related to minimum wage and exemption thresholds that adjust periodically.

Prior to the COMPS Orders, the overtime threshold had remained at $23,600 per year since 2004. The COMPS Orders provide increasing salary thresholds annually. While lower than the original proposal, annual thresholds continue to increase each year. The schedule provides as follows:

Notably, the July 1, 2020 threshold was identical to the U. S. Department of Labor’s salary threshold for FLSA “white collar” exempt employees. However, starting on Jan. 1, 2021, the Colorado minimum annual exemption threshold is higher than the federal requirement.

Under the COMPS Order, the minimum exempt salary threshold will increase annually by $5,000 until it reaches $55,000 ($1,057.69 per week) on Jan. 1, 2024. From that point forward, the exempt threshold will be adjusted annually using the same Consumer Price Index metrics that annually adjust the Colorado minimum wage.

Additional Changes to Exemptions from Minimum Wage and Overtime

In addition to the changes addressed above, the new rules and orders also impact the following areas:

• Agricultural worker overtime: The COMPS Order modifies Colorado law regarding overtime for agricultural workers. In November 2022, these workers may becomes eligible for overtime pay based on hours worked in a day or a workweek. However, they may remain exempt from this requirement if specific pay and break requirements are met.
• Agricultural range worker minimum wage. Generally, these workers will be eligible for the increased minimum wage, but may continue to be exempt from this requirement if paid a minimum salary as noted in the 2022 PAY CALC Order.
• Minimum wage for disabled workers. COMPS Order #38 has eliminated the previous option to pay disabled workers who have been certified to be less efficient in their performance a special minimum wage that is up to 15% less than the other applicable minimum wages.

What's next?

Paychex understands the complexities of trying to stay up-to-date with regulations that impact your business and offers HR solutions and services to help make it simpler for employers to focus on running their business.  We’re here to support your Colorado business.

This article was originally published March 4, 2020.