Think You Aren't A Colorado Employer? Colorado Thinks Otherwise

Employers with employees, including remote workers, who live or work in more than one state have likely already faced the challenge of determining what employment laws apply...
United States Employment and HR
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Employers with employees, including remote workers, who live or work in more than one state have likely already faced the challenge of determining what employment laws apply, the work they apply to, and when. In recent years, the Colorado legislature has pushed to be on the cutting edge in this area, giving states that have traditionally been seen at the forefront of this topic, like California, a run for the title. As part of these efforts, we've seen the state take an aggressive approach when defining who these employment laws apply to. In many instances, according to the state of Colorado, these laws may apply even if your company has no traditional work site in Colorado. Do you let an employee work remotely from Colorado? Do any of your workers come into the state, even occasionally, for work?

If so, you may have legal obligations under Colorado law you weren't even aware of. Here is a sampling of some, but certainly not all, of Colorado's most far-reaching employment law requirements.

Restrictive Covenants

Colorado expects businesses that require Colorado-based workers to sign certain restrictive covenants (including noncompetes, customer nonsolicits, and/or confidentiality agreements) to ensure compliance with its law in such agreements. One such requirement is that such businesses cannot require these workers to litigate disputes over these restrictive covenants outside of Colorado. In fact, even including a choice of law provision that purports to apply the laws of another state (such as where the company may be headquartered) in an agreement covered by Colorado's "covenant not to compete" law could get you into trouble with the state. By statute, this law purports to apply to any "covenant not to compete" signed by a worker who, "at the time of termination, primarily resided and worked in Colorado." That's right, the question isn't where a worker was when they signed the agreement, or even where they are working when you seek to enforce it; it's whether they were in Colorado—for work or to live—at a totally different point in time, often years down the road, when their employment ends. More detailed information on Colorado's Restrictive Covenants law can be found in "Considering Restrictive Covenants in Colorado? Get Ready to Jump Through Hoops," published in this newsletter.

Paid Time Off

Colorado, like an ever-expanding list of states, passed a paid sick leave law in 2020, the Healthy Families and Workplaces Act (HFWA), which has been amended more than once since it was first passed. According to Colorado, all employers must provide HFWA leave to all employees in Colorado, "regardless of the employer's size, industry, headquarters site, or exemption from other laws." The requirements of HFWA are addressed in more detail in "Colorado Laws Complicate Multi-Jurisdictional Leave Policies."

Just a few years later, Colorado's Paid Family and Medical Leave Insurance Act (FAMLI) also went into effect. FAMLI applies to virtually all employers with one or more employee doing work in Colorado. FAMLI requires covered employers to register for the state-run insurance program or receive approval to use their own self-insured, or third-party-insured, program. Under FAMLI, virtually all employees are entitled to take at least 12 weeks of paid leave for reasons that resemble, but do not exactly match, those that employers are likely familiar with under the federal Family and Medical Leave Act (FMLA), which provides unpaid leave. Unlike FMLA leave, employees become eligible to take FAMLI leave almost immediately after they are hired. Employers participating in similar mandatory leave programs in other states likely will not be exempted from the requirements of Colorado's FAMLI law just because they also have to participate in those other programs. Similarly, employers that provide generous leave under company policy, often providing far more than what any law requires, also won't be exempted based on their existing policies alone and are legally required to navigate all of the state's detailed requirements.

Job Posting Requirements

While we have seen more pay transparency laws being passed across the country, this is another area where Colorado was at the front of the pack, taking credit for the "nation's first pay transparency law of its kind," and has taken the position that its law applies to employers who likely never thought of themselves as "Colorado" employers. Colorado's Equal Pay for Equal Work Act (EPEWA) requires employers with "at least one" Colorado employee to provide written notice of "job opportunities" to all current employees before making hiring decisions and include all "wage rate" information applicable to the opportunity in such notice, as well as in any external posts they may use to advertise and fill the position. What counts as a "job opportunity" is exceedingly broad, and notice must be provided to employees even if they are not qualified or eligible for the position. Information that must be included in every post includes the compensation being offered (including both base pay and things like bonus and commission eligibility), benefits that come with the position, and instructions for how to apply. In an effort to avoid the EPEWA's complicated mandates, shortly after this law was passed, some out-of-state employers began informing people that "Coloradans need not apply." The state made clear this was not an acceptable way to avoid the mandates of the EPEWA.

While recent amendments made the EPEWA's requirements slightly more rational and (at least in some ways) easier to navigate, these recent amendments also added new requirements that previously didn't exist. Now, not only must employers disclose available job opportunities; they must also inform employees who was selected for the position after a hiring decision is made.

Once a company employs at least one person in Colorado, according to the state of Colorado, the EPEWA covers all employees of that employer. At least for now, positions that must be performed entirely outside of the state of Colorado are not covered, but remote positions at a covered company are all subject to the EPEWA's mandates, even when the employer doesn't know or care whether applicants will be from Colorado. Only if the job can be performed only outside of Colorado and the employer has no physical work site in Colorado, may an employer with "one or more" Colorado employees disregard the complicated posting and notice requirements of the EPEWA.

Wage and Hour

A lot of attention has been given recently to the U.S. Department of Labor's increased salary threshold for exempt employees. But for companies that have employees performing work in Colorado, even if only occasionally, the state of Colorado says Colorado's Wage Claim Act and its implementing regulations, the Colorado Overtime and Minimum Pay Standards Order (COMPS Order), establish the appropriate wage and hour requirements applicable to such work—and those requirements far exceed federal law on virtually all fronts.

For example, what counts as compensable work time (a/k/a "time worked") is more expansive in Colorado, and overtime provisions are significantly more onerous. While there is some overlap in federal and state overtime exemptions, Colorado's exemptions are generally narrower. Some commonsense exceptions, such as domestic workers (e.g., your nanny or housekeeper), do not exist at all in Colorado.

Of the exemptions that do exist, the compensation thresholds for nearly all of these exemptions are significantly higher than those found in federal law. For example, in 2024, executive/supervisor, administrative, and professional (EAP) employees must earn $1,057.69 per week ($55,000 rounded annual equivalent). Employers must also be able to show EAP employees were paid an amount sufficient to cover minimum wage for all hours worked in a workweek (a tough requirement to meet for employers that do not have exempt employees, to track hours worked). Highly compensated employees must earn at least $123,750 annually (as opposed to $107,432 under federal law) to fit within that exception and have a weekly compensation requirement on top of the annual threshold.

For non-exempt employees, Colorado's minimum wage is almost twice that of the federal minimum wage, and there are even higher minimum wages for certain subgroups of employees (e.g., minors) or when the work is performed in certain cities (e.g., Denver's minimum wage is nearly $4 higher than the state's).

Even assuming the appropriate base pay is provided, Colorado state law has specific rules and restrictions on things like tip and meal credits and deductions from pay. Even failure to ensure the proper paperwork is in place could result in a wage theft claim. Certain Colorado wage claims are subject to a six-year statute of limitations, and employers that get it wrong may face significant financial judgments, be obliged to pay the employee's attorney's fees, and even face criminal liability.

Posting and Notice Requirements

Finally, Colorado has exceptionally specific posting and notice requirements, which are found not only in Colorado's wage and hour laws, but in nearly all of the employment laws Colorado has passed in recent years. Employers that fail to include specific language/disclaimers in their handbooks, employment agreements, and workplaces could face serious liability. Additionally, failure to include certain language in their policies and to implement certain business practices could result in an employer forfeiting valuable defenses should litigation ensue.

These requirements aren't different just because your employee is working remotely from Colorado or works there only some of the time. As Colorado continues its aggressive approach to employment law, it becomes progressively more difficult for companies with multi-jurisdictional operations to keep up. Having experienced Colorado employment counsel on your team can help you triage compliance and avoid the "gotcha" so many out-of-state companies have faced from the state of Colorado in recent years.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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