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Colorado Department of Labor and Employment’s (CDLE) Recent Rulemakings: Forfeiture of PTO and Other Wage Decisions

On November 10, 2021 the CDLE ended its 2021 legislative rulemaking session by issuing three rules that are set to go into effect as of January 1, 2022: (1) the Colorado Overtime and Minimum Pay Standards Order #38 (COMPS 38), (2) the updated Wage Protection Rules, and (3) the 2022 Publication and Yearly Calculation of Adjusted Labor Compensation Order(2022 PAY CALC). 

“Use it or Lose it” PTO No Longer Allowed

The updated Wage Protection Rules address use it or lose it PTO policies. Back in June for the case Nieto v. Clark’s Market, Inc., the Colorado Supreme Court confirmed that the Colorado Wage Claim Act would forbid the forfeiture of any accrued vacation time, regardless of any stipulations within an employer’s policy or contract agreement. Although the court’s decision provided clarification for employers that offered vacation policies, it lacked defining the parameters for those employers offering an all-encompassing paid time off (PTO) policy. As of November, employers are no longer left in the dark as the CDLE has issued a ruling that determines that “pay for leave, regardless of its label, that is usable at the employee’s discretion (other than procedural requirements such as notice and approval of particular dates), rather than leave usable only upon occurrence of a qualifying event (for example, a medical need, caretaking requirement, bereavement, or holiday).” With this clarification of the definition and the court decision in June, this would now confirm that both PTO and vacation time must be paid out for at the time of separation even when an employment agreement or policy provides that accrued vacation is not paid out upon separation.

While use it or lose it policies are not permitted, employers may still maintain agreements on matters such as: (1) whether there is any vacation pay at all; (2) the amount of vacation per year or other period; (3) whether vacation pay accrues all at once, proportionally each week, month, or other period; and (4) whether there is a cap of one year’s worth (or more) of vacation pay. Thus, employers may have policies that cap employees at a year’s worth of vacation pay, but that do not forfeit any of that years’ earned vacation.

Paid Sick Leave Rate of Pay

As of the new year, Colorado began requiring that employers provide state-mandated paid sick leave via the Healthy Families and Workplaces Act (HFWA). Under the HFWA, employers with 16+ employees must provide full-time employees with up to 48 hours of paid sick leave per year and beginning 2022, all employers regardless of size will have to provide the time. While this is an incredible benefit, the act left out information regarding how exactly employers would go about calculating the pay. Thankfully, the updated Wage Protection Rules have provided some clarity. Specifically,

  • Bonuses need not be included in the HFWA pay rate;
  • Pay rate is determined based on “the employee’s pay over the 30 calendar days prior to taking leave” or the length of the employee’s employment, whichever is shorter; and
  • Pay rate for employees with variable hourly rates should be calculated by adding all the wages for the period referenced above, and then dividing that amount by the total number of hours worked for that period.

The recent clarification provided by the CDLE, should assist employers with being able to accurately calculate pay associated with any state-mandated paid sick leave.

COMPS 38 & 2022 PAY CALC Order

Through the passing of COMPS 38 and the 2022 Pay CALC Order, the CDLE intends to clarify minimum wage amounts and salary thresholds for certain exemptions by listing the proper amounts in a table format. According to the CDLE’s Statement of Basis and Purpose, the purpose of the PAY CALC Order was to alleviate the need to revise the COMPS orders annually when the sole updates are wage and salary threshold amounts.

COMPS 38 also assists Colorado employers by providing alternatives for determining the application of the duties tests for the applicable white-collar exemptions by creating a new highly compensated employee exemption. For an individual to qualify under this new exemption classification, the following must apply:

  1. The employee is paid 2.25 times the rounded annual salary for the executive, administrative, or professional (EAP) salary limit in the PAY CALC Order ($101,250 for 2022);
  2. The employee customarily and regularly performs any one of the exempt duties and responsibilities of an EAP employee; and
  3. The employee’s primary duties consist of office or non-manual work.

In addition, COMPS 38 provides clarification to employers for calculating the rate of pay for employees that perform multiple roles at different rates. According to the CDLE, the regular rate for an employee working two or more non-exempt jobs at different hourly pay rates for the same employer within a specific workweek shall be calculated as follows:

  • Rate based on a weighted average: The employee’s regular rate for the workweek is determined by adding together all the wages earned performing each job, then dividing that amount by the total number of hours worked in all jobs, consistent with the federal Fair Labor Standards Act (FLSA) and resulting in a weighted average rate of pay, or
  • Rate based on the job actually performed during overtime hours: The employee’s regular rate is the regular rate of hourly pay for the job being performed during the actual overtime hours.

In lieu, of a written agreement that speaks to a pre-determined method for calculating the rate of pay for multiple positions, the employee’s regular rate shall be calculated using the “weighted average” method.

Finally, COMPS 38 also provides an interpretation, in response to the passage of Senate Bill 21-087 (SB 87), agricultural workers now must be paid the state minimum wage ($12.56 in 2022), but they have the ability of remaining exempt from overtime requirements if specific break and compensation requirements are met. According to the 2022 PAY CALC Order, agricultural workers can remain exempt from minimum wage requirements if they are paid a minimum of $515 per week.

Next Steps for Employers

In response to previous COMPS orders, the CDLE has issued posters that employers are required to display, informing employees of the year’s wage updates. Colorado has issued an updated poster in response to the issuance of COMPS 38 and is located here. In addition, other required posters are available from the CDLE by clicking here.

Employers are encouraged to download the most recent notice, post it in a conspicuous location physically or provide the notice electronically to employees, if needed.

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