November 30, 2020Client Alert

Colorado Adopts Sweeping New Minimum Wage Order Raising Overtime Thresholds

Last week, Colorado finalized Colorado Overtime Minimum Pay Standards (COMPS) Order #36. It will replace Amended Wage Order #35, which raised the state minimum wage for most workers to $12.00/hour effective January 1, 2020.

Order #36 updates several aspects of state wage and hour law, most notably by expanding its coverage and raising state overtime thresholds above those set by federal law. The new thresholds go into effect July 1, 2020. The remainder of the rule goes into effect March 16, 2020. Here are the key takeaways for employers:

  1. It covers more employees.

The prior wage order covered only four industries: Retail and Service; Food and Beverage; Commercial Support Service; and Health and Medical. Order #36 covers all employees unless specifically exempted.

  1. It sets overtime thresholds that will increase incrementally through 2025.

To qualify for exemptions with a salary requirement, the employee must be paid a salary equal to or above the thresholds below. Note, the final rule differs from the proposed rule by adopting a shorter phase-in period, with smaller incremental increases in the first three years, and higher incremental increases in the fourth and fifth year:

Effective Date Weekly Overtime-Exempt Salary (& Rounded Annual Equivalent)
July 1, 2020 $684.00 per week ($35,568 per year) (same as the federal threshold)
January 1, 2021 $778.85 per week ($40,500 per year)
January 1, 2022 $865.38 per week ($45,000 per year)
January 1, 2023 $961.54 per week ($50,000 per year)
January 1, 2024 $1,057.69 per week ($55,000 per year)
January 1, 2025 The 2024 salary adjusted by the same CPI as the Colorado Minimum Wage
  1. It added and deleted exemptions.

The available exemptions remain the same with the following exceptions:

  • It adds the “Owner” exemption available under federal law.
  • It adds a Non-Profit Proprietor exemption, applicable to the highest-ranked and highest-paid employee of a non-profit employer.
  • It adds a duties test for the “highly technical computer-related occupation” exemption previously treated under the professional exemption.
  • It adds certain range workers and field staff of seasonal camps and outdoor education programs to the “in-residence workers” exemption.
  • It removes an exemption for “companions” and other “domestic” workers that covered only those employed directly “by households or family members to perform duties in private residences.”
  1. It also clarifies various job-specific exemptions.

In addition to adding and removing exemptions, Order #36 modifies several existing exemptions to clarify ambiguous language yielding wage disputes and litigation. More specifically, it:

  • Defines “interstate” for purposes of the “interstate drivers, driver helpers, loaders or mechanics of motor carriers” exemption.
  • Clarifies the taxi exemption applies only to taxi service providers licensed by the state or local government.
  • Clarifies that exemptions for student residence workers, property managers, and patient workers in institutional laundries include in-residence work requiring exemption from hours rules.
  • Clarifies the student worker exemption covers students enrolled for credit, not all workers who happen to be students.
  • Provides that after 2020, the $27.63 hourly rate for the “highly technical computer occupations” exemption will inflation-adjust by the same consumer price index as the state minimum wage.
  1. It clarifies rules covering rest periods.

Order #36 updates rules covering rest periods to clarify two points that have caused confusion for employers. First, “to the extent practical,” rest periods shall be provided in the middle of each 4-hour work period. Second, if an employee is not allowed a 10-minute paid rest period, the employee is owed 10 minutes of extra pay.

  1. It modifies rules allowing credits for providing meals or lodging.

For meal credits, the new rule authorizes employers to take a credit when acceptance of a meal is voluntary and uncoerced. Under the old rule, the employee had to actually consume the meal.

As for lodging credits, the new rule raises the credit employers may take for a private apartment or house from $25 to $100. Note, the rule still requires that employers take the lower of the $100 credit, the employer’s cost, or fair market value. The rule also adds requirements similar to federal law, which require lodging be accepted voluntarily and primarily for the benefit and convenience of the employee, not the employer.

  1. It authorizes the fluctuating workweek method of calculating the regular rate for employees not paid on an hourly basis.

Unlike the former rule, Order #36 explicitly states, “[e]mployers need not pay employees on an hourly basis.” It explains: “If pay is on a piece rate, salary, commission, or other non-hourly basis, any overtime compensation is based on an hourly regular rate calculated from the employee’s pay. In such cases, the regular rate equals the total paid divided by hours worked, if the parties have a clear mutual understanding that the salary is: (1) compensation (apart from any overtime premium) for all hours each workweek; (2) at least the applicable minimum wage for all hours in workweeks with the greatest hours; (3) supplemented by extra pay for all overtime hours (in addition to the salary that covers the regular rate) of an extra ½ of the regular rate; and (4) paid for whatever hours the employee works in a workweek."

  1. It clarifies what unlawful “reprisal” means.

In conformity with Colorado case law, Order #36 clarifies that “reprisal” means any form of reprisal against actual or anticipated participation in any wage investigation, hearing, complaint, or procedure.

  1. It requires employers to post in more places.

Employers are required to display the effective COMPS wage order poster in a place in an area frequented by employees where it may easily be read during the workday. Under the new rule, employers who issue a handbook must also a copy of Order #36 or poster in the handbook. The rule also clarifies that if the work site or other conditions make a physical posting impractical, the employer can comply with the rule by distributing the poster to all employees instead of posting.

  1. It requires some employers to post in other languages.

    Employers with employees who have limited English skills must post the Order #36 poster in the employee’s native language. The Division will issue a Spanish translation. Employers may request translation into any other language, which the Division will provide if feasible.
  2. It reminds employers subject to the federal FLSA to comply with the rule more favorable to employees.

If an employee is covered by multiple minimum or overtime wage requirements, the requirement providing a higher wage, or otherwise setting a higher standard, shall apply. Additionally, the rule makes clear the Division will accept state law complaint by employees who claim entitlement to state, federal, or local minimum or overtime wages.

These changes will have a significant impact on Colorado employers. Employers are advised to seek legal counsel familiar with these changes to ensure full compliance.

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