Significant New Changes to Colorado’s Overtime, Minimum Wage Rules Proposed for 2020

The Colorado Department of Labor and Employment has proposed significant changes to overtime and minimum pay standards to take effect on March 1, 2020. The new exempt salary threshold would become effective on July 1, 2020. The Colorado Overtime and Minimum Pay Standards (COMPS) Order #36 would replace Minimum Wage Order #35 and expand coverage and create a new salary threshold for exemption. COMPS Order #36 contains several rules that specify the new requirements:

COMPS Order Coverage. Previous wage protection rules covered only four broad industries (retail and service; food and beverage; commercial support service; and health and medical) and allowed only some employees to receive wage order protection depending on the employee’s duties and line of business. The new rule would create presumptive wage protection coverage for all employees, unless specifically exempted under Rule 2, which identifies numerous exemptions, some of which span all employers of certain types, while others are job-specific.

Salary Thresholds for Exemption. To be exempt from overtime and break requirements under COMPS Order #36, an employee must have exempt duties (e.g. executive/supervisory, professional, etc.) and be paid a salary that meets or exceeds the new salary threshold.  Federal law sets a minimum exempt annual salary of $35,568. Under the Fair Labor Standards Act, states may adopt higher salary exemptions and minimum wage rates. COMPS Rule 2.5 adopts a six-year phase-in minimum salary for exemptions. As previously noted, the new exempt salary threshold of $42,500 would take effect on July 1, 2020. After 2021, the minimum salary would rise by $3,000 per year until reaching $57,500 in 2026, at which time it would adjust annually in accordance with the Consumer Price Index.

COMPS Order #36 only applies to employees with exempt duties (e.g. executive/supervisory, professional, etc.). The rule parallels the federal wage law in requiring no minimum salary for doctors, lawyers and teachers. Employers may choose how to comply by electing to:

1. pay the exemption salary;
2. instead pay an employee hourly with overtime at any rate at or above the Colorado minimum wage; or
3. shift hours among employees to minimize overtime hours.

Clarification of How Federal, State and Local Wage Laws Apply. COMPS Rule 3.2 clarifies that an employer must pay the greater of whatever federal, state or local wage rules apply. For example, if Boulder has a higher minimum wage than COMPS Order #36 (2020—$12 per hour/$8.98 for tipped employees), then the employer that has employees in Boulder must pay those employees the higher minimum wage rate.

Rest Periods. COMPS Rule 5.2 provides:

1. “to the extent practicable,” 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 purpose; and
2. an employee who is not allowed a 10-minute paid rest period is owed 10 minutes’ pay. 

Deductions, Credits and Charges. COMPS Rule 6.2 allows employers to reduce wages by taking a “credit” for providing meals or lodging, but modifies previous rules as follows:

1. accepting a meal (which must be provided at cost or value, without added profits) must be voluntary for the employee, which eliminates the previous requirement that a meal must be consumed before deductions are permitted; and
2. credit is allowed for lodging that is voluntary for the employee, not primarily for the employer’s own convenience, appropriately documented, and no greater than the smaller of
   1. the employer’s cost,
   2. the fair market value, or
   3. $25 per week for a room in a shared residence, dorm or hotel, or $100 for a private apartment or house.

Rule 6.3 no longer allows employers to require a “deposit” as “security” for a required uniform.

Overtime Pay Calculation When Pay is Not Hourly. COMPS Rule 1.7 clarifies how to calculate regular and overtime pay rates for non-exempt workers with non-hourly pay, and allows a fluctuating workweek calculation where the hourly rate may vary each week by dividing the weekly salary by the number of hours the employee worked that week. The calculation is permissible as long as the employee is actually paid the required overtime in addition to the weekly salary. For non-exempt employees denied overtime, the hourly rate equals the weekly salary, divided by 40 (the number of hours that were compensated if the employee was not paid any of the required overtime pay).

More Transparency and Language Inclusiveness in Wage Poster Rules. Employers are required to display a wage order poster. COMPS Rule 7.4 modifies the requirement in three ways:

1. If an employer distributes a handbook or policies to employees, it should include a copy of the COMPS Order or poster. If the work site or other conditions make a physical posting impractical, the employer can instead provide a copy of the COMPS Order or poster to each employee.
2. Employers that have employees with limited English skills should post a Spanish poster the Division will provide, or the employer can ask the Division for a translation in any other language.
3. An employer that fails to post as required is ineligible for any employee-specific credits or exemptions.

Armstrong Teasdale’s Employment and Labor practice routinely guides employers in their efforts to comply with the broad landscape of wage and hour laws and will issue additional alerts as the Colorado minimum pay and overtime rules continue to evolve.