Winter has already come to the Rocky Mountains, but another challenge is looming on the horizon for Colorado employers. In November, the Colorado Department of Labor and Employment’s (CDLE) Division of Labor Standards and Statistics (“Division”) proposed replacing Minimum Wage Order #35 with Colorado Overtime and Minimum Pay Standards Order (COMPS) Order #36. If it becomes final in March as expected, COMPS Order #36 will change Colorado’s minimum wage and overtime landscape for employers in several key ways.  The two major changes are expanded coverage and higher salary thresholds for exempt employees, but there’s a lot for Colorado employers to digest beyond these two changes. 

Expanded Employer Coverage

Previous Colorado wage orders covered employers in only four broadly defined industries: retail and service, food and beverage, commercial support service, and healthcare and medical. The new COMPS order covers every employer in Colorado, unless you are specifically excluded. A janitor will be treated the same way under the new rules regardless of whether she works at a retail store, hospital, sports arena, or construction firm.

Rule 2 lists numerous exemptions from the minimum wage and overtime requirements. Some apply to specific jobs (e.g., interstate transportation workers) and some apply to all Colorado employees in a certain category (e.g., bona fide volunteers). If your organization was previously exempt from the rules, you’ll want to closely examine whether any of the specific exemptions still apply.

Increased Salary Thresholds for Exemption

The COMPS order tracks federal law with regard to the most common overtime exemptions for administrative, executive, and professional employees. Although the substantive duties tests for those exemptions haven’t changed (i.e., an administrative employee still must exercise “independent judgment and discretion in matters of significance”), the minimum salary threshold in Colorado will rise substantially with the changes.

Under new federal regulations, the minimum salary threshold is only $35,468. COMPS Rule 2.5 adopts a significantly higher minimum salary threshold beginning July 1, 2020: $42,500. That baseline will continue through December 31, 2021. However, after January 1, 2022, the minimum salary threshold increases by $3,000 each year until it reaches $57,500 in 2026. It will be adjusted annually after 2026 by the same Consumer Price Index (CPI) as the Colorado minimum wage.

The COMPS order’s six-year phase-in parallels the salary basis increase the Obama administration had planned to adopt in 2016 before the Trump Administration reversed course. The following table summarizes the six-year phase-in under COMPS.

Localities May Set Higher Standards

COMPS Rule 3.2 clarifies that wages owed to an employee will be set at the highest rate required by whichever federal, state, or local wage rules apply. As localities like Boulder and Denver adopt minimum wage requirements that exceed state and federal levels, it’s important to note that the CDLE will accept complaints for violations of local ordinances.

Other Changes

Colorado employers should be mindful that the COMPS order contains many other changes that could affect your business and operations. Summarized briefly, but by no means completely, the new rules:

• Create new exemptions (e.g., owners/proprietors of the business and nonprofit executives);
• Clarify the definitions of certain other exemptions (e.g., interstate transportation and taxi drivers, laundry workers, and work-study students);
• Resolve two common points of confusion about paid “rest periods,” clarifying that the 10-minute paid rest period must fall during the middle, not at the end or beginning, of each four-hour work period, and that the failure to provide a rest period will result in 10 extra minutes of wages due to each affected employee;
• Modify the rules governing when an employer may receive a credit for providing meals and lodging and eliminate the ability to require a “deposit” for a required uniform;
• Expressly permit the “fluctuating workweek” method of calculating wages owed to nonexempt workers who are paid on a salary or other nonhourly basis, as long as workers are paid the overtime they are owed on top of their weekly salary;
• Clarify the statutory ban on retaliating against employees for their “actual or anticipated participation in any wage investigation hearing, complaint or procedure”; and
• Require employers to provide a copy of the COMPS order or poster directly to employees who are unlikely to have access to the workplace poster (an acknowledgment of Colorado’s increasingly mobile and online workforce) and to post a Spanish-language translation for workers with limited ability to understand English.

Timing of Changes

The COMPS order was proposed on November 15, 2019, and the comment period expired at the end of December. If adopted, the final rules will become effective March 1, 2020, and July 1 will be the effective date for the new minimum salary thresholds. We don’t expect major changes to the order during the short period leading up to its effective date, but stay tuned for developments.