Effective March 16, 2020, COMPS Order #36 (the Order), issued by the Colorado Department of Labor and Employment, will bring about sweeping changes to Colorado’s overtime and minimum pay standards (COMPS) impacting private employers. The Order will also succeed the currently operative Amended Minimum Wage Order #35, which is the source of Colorado’s wage rights and responsibilities beyond those provided by law.
The Order, like the department’s prior annually issued wage orders, includes laws pertaining to an individual’s eligibility for Colorado minimum wage, overtime pay for work past 40 hours per week and 12 hours per day, meal and rest breaks, and other rights and responsibilities belonging to Colorado employers and employees, such as what wage deductions are permissible, how hourly rates are calculated from non-hourly pay for overtime, and posting requirements. Unlike many previous wage orders, however, the new Order expands beyond current federally mandated wage and hour requirements in several key areas, includes numerous substantive changes favoring employees, and imposes significant compliance difficulties on private employers, requiring swift adjustment prior to the March deadline. A summary of key changes contained in the Order is provided below.
Under prior wage orders released by the department, only four broadly defined industries were covered by the Colorado-specific wage laws. These included retail and service, food and beverage, commercial support service, and health and medical. Pursuant to Rule 2.1 of the new Order, all private employers are presumptively covered unless a specific exception applies. Public employers continue to be excluded from coverage.
Given this change, employers in all industries should now revisit whether an exemption applies and, if not, take steps to ensure compliance with the revised Order by examining Rules 2.2 through 2.4. The full text of the Order can be found here.
Salary Thresholds for Exemption to Overtime
The Order also includes important adjustments to the salary thresholds required for eligibility under the federal overtime exemption. Although the Order continues to, generally speaking, track federal law for the administrative, executive and professional employee exemptions (i.e., white collar exemptions) related to the substantive duties tests used for evaluating whether these exemptions apply, the Order adopts new minimum exempt salary thresholds for these exemptions. These salary thresholds will go significantly higher than those provided under federal law (which was also revised to $35,568.00 effective Jan. 1, 2020, and will be applied in Colorado through Dec. 31, 2020).
At the outset, effective Jan. 1, 2021, and unless an exception applies, the Order sets a minimum exempt salary threshold of $40,500.00. After that time, the Order will continue to increase the minimum exempt salary threshold annually, on Jan. 1 of each year ($45,000.00 on Jan. 1, 2022, and $50,000.00 on Jan. 1, 2023), until it reaches $55,000.00 on Jan. 1, 2024. Further adjustments thereafter will be made pursuant to the Consumer Price Index.
In addition to altering the salary threshold for exemptions, the Order adds and removes certain types of exemptions (e.g., owners, proprietors, domestic workers, highly technical computer workers, etc.) and provides much-needed clarity to several existing exemptions (e.g., interstate transportation workers, taxi drivers, student residence workers, etc.). A complete list of changes to the exemptions is set forth in Rule 2.2 of the Order, and employers wishing to use one or more exemption should carefully study its provisions and/or consult with legal counsel.
The Order also imposes major changes to employee rest periods. Specifically, Rule 5.2 clarifies that “to the extent practical,” rest periods shall be provided in the middle of each four-hour work period, because a rest period at the start or end of a shift fails to serve its rightful purpose. The Order sets forth a specific schedule, subject to certain exceptions, for when an employee must receive paid rest breaks. Moreover, Rule 5.2 clarifies that if an employee is not authorized and permitted to take a 10-minute paid rest period, he or she is owed an extra 10 minutes of pay because the employee would have worked an extra 10 minutes without sufficient pay. This new requirement will result in an additional Colorado-specific wage claim.
To resolve confusion under federal law as to the meaning of “time worked,” particularly in the context of pre- or post-shift tasks that take more than one minute, the Order also clarifies in Rule 1.9 that “time worked” includes, without limitation, putting on or removing work clothes or gear, receiving or sharing work-related information, security or safety screenings, certain travel-related clocking or checking in or out, and time spent waiting for any of these tasks. As a result of these guidelines, employers should not only review their timekeeping policies as they pertain to these practices, but should review their timekeeping systems, duties requirements and employee practices to ensure capture of these discrete increments.
Additional Changes and Exclusions, Including Important Posting Requirements
Other notable changes include the modification of language regarding meal, lodging and tip credits; uniform deposits; regular rate calculations for non-hourly pay; reprisal bans; and more. In addition, the Order expands previous wage order posting requirements by requiring an employer display a poster containing the Order in an area frequented by employees (like a breakroom) or, if working conditions make physical posting impractical, the employer must provide a copy of the poster or Order to employees during their first month of employment. In addition, an employer must include a copy of the Order in an employer’s handbook or policy book, as applicable, including with necessary translations for Spanish-speaking employees, and have employees acknowledge in writing that they have been provided with a copy of the Order. And if an employer does not comply with the required posting obligations, that employer becomes ineligible for employee-specific credits, deductions or exemptions provided for in the Order. Finally, Rule 8.7 of the Order includes the department’s intent that the provisions of the Order be “liberally construed.”
Importantly, the Order does not change the meal period standard for exempt employees, include a highly compensated worker exemption, address joint employer concepts or resolve uncertainty in Colorado regarding vacation payouts and agreements. Moreover, the Order does not impact the city of Denver’s new minimum wage law, H.B. 1210, which raised the minimum wage to $12.85 effective Jan. 1, 2020.
In sum, COMPS Order #36 constitutes a landmark regulatory change to Colorado’s wage and hour laws and imposes new obligations and challenges for private employers. As a result, Colorado employers should prepare now for the Order’s fast-approaching implementation. Colorado employers should review their current wage and hour practices and policies to ensure compliance by next month’s effective deadline. Due to the length and complexity of these new regulations, however, Colorado employers are encouraged to review and revise their policies in consultation with local counsel.
For additional information regarding COMPS Order #36, please contact BakerHostetler’s Denver Labor and Employment Group.