The Colorado Legislature and Colorado Department of Labor and Employment, specifically the department’s Division of Labor Standards and Statistics (DLSS), have acted aggressively to reshape rules applying to the employee-employer relationship over the past two years. The year ahead will be no exception.

Let’s look briefly at some of the changes coming in 2022. The DLSS wage protection rules and COMPS order will change significantly. For more information on the regulatory changes discussed here, log on to the DLSS website at https://cdle.colorado.gov/dlss.

Vacation isn’t just vacation. One of the most significant changes in 2022 arises from the Colorado Supreme Court case in Nieto v. Clark’s Market. The Colorado Wage Act was already clear that earned and determinable vacation constitutes wages that must be paid upon separation from employment if paid vacation remains unused. The Supreme Court held that once vacation is accrued, it’s earned and can’t be forfeited. The decision made “use it or lose it” vacation policies illegal. But Colorado courts have never addressed whether vacation pay also includes such paid leave as paid time off or personal days.

The Colorado Wage Protection Rules that took effect Jan. 1 make it clear vacation pay is any “pay for leave, regardless of its label, that is usable at the employee’s discretion … rather than leave usable only upon occurrence of a qualifying event (for example, a medical need, caretaking requirement, bereavement or holiday).” This increases unfunded liabilities for employers who offer PTO in lieu of separate vacation and sick leaves or offer “personal” days or holidays that employees use at their discretion.

The new rule clarifies employers aren’t required to offer vacation at all and may cap the amount of vacation an employee may accrue. While the employer can’t take away vacation already accrued, it can limit how much vacation is accrued. Under this type of cap, once an employee hits a particular limit, the employee earns no new vacation time until the employee falls under the cap limit. Employers Council attorneys and human resource professionals have recommended this type of cap for many years. The Employers Council provides resources and counsel to its members on how to structure this type of vacation plan.

Colorado overtime and minimum pay standards (COMPS) Order 38 significantly changes certain agricultural and livestock exemptions. The new COMP order effective Jan. 1 introduces complex new rules for applying overtime exemptions to agricultural and range workers and “decision-making managers” at livestock employers. Employers engaged in agriculture and livestock production should read the new COMPS order — available on the DLSS website — carefully and consult legal counsel with any questions.

COMPS Order 38 specifies how the regular rate is calculated for employees who work under multiple hourly pay rates. To calculate the regular pay rate for employees who work under variable pay rates, new rules require employers to use the “weighted average” method. All wages earned performing each job are added, and the total is divided by the total number of hours worked.  Employers may instead pay overtime based upon the pay rate in effect at the time the overtime hours were worked. This is consistent with federal law. But COMPS Order 38 requires an employer to have a written agreement with the employee stating the rate in effect method will be used before the work is performed. If this requirement isn’t met, the employer must use a weighted average to calculate overtime.

Break time is required paid time. The current COMPS order already requires 10-minute rest periods and requires employers to pay employees for missed rest periods. COMPS Order 38 clarifies this penalty applies to any required rest period, including incomplete rest periods, rest periods for employees who don’t earn hourly wages and rest periods under any other law that provides for a rest period of a different length than the COMPS order. COMPS Order 38 makes clear this requirement doesn’t eliminate the employer’s obligation to provide rest periods. The extra compensation is a penalty for violating the law, not a way around providing breaks.

The Healthy Families and Workplaces Act (HFWA) applies to all employers in 2022. While this isn’t new, a reminder is in order. The Colorado Legislature passed HFWA in 2020. In 2021, the HFWA applied only to employers with over 15 employees.  In 2022, the HFWA applies to all employers regardless of size.  The HFWA requires employers to provides up to 48 hours of leave that can be used for specified health purposes. The leave must accrue at the rate of at least one hour for every 30 hours worked. An organization’s paid time off policy will satisfy the HFWA if the policy meets all HFWA requirements.  A helpful information bulletin on the FHWA is available at the DLSS website.

New HFWA rules address how employees must be paid for sick leave. The wage protection rules that took effect Jan. 1
clarify how special situations must be handled, including the amount of leave that must be made available to on-call employees or employees who use work indeterminate shifts.

The new rules also specify how sick leave pay is calculated.  The calculation of the “regular rate” for purposes of paying HFWA-required sick leave is significantly different than the “regular rate” the COMPS order uses for calculating overtime. The HFWA pay rate is determined by looking back at the employee’s pay over the 30 calendar days prior to taking leave. In contrast, the COMPS order — and Fair Labor Standards Act — calculate the regular rate for paying overtime on a single workweek.  While bonuses are included in determining the regular rate for calculating overtime under the COMPS Ooder, bonuses are omitted from the regular rate when calculating the rate for sick pay.  

In conclusion, employers should read the new regulations to avoid inadvertent violations and subsequent damages and penalties.