August 15, 2022

Volume XII, Number 227

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August 15, 2022

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Colorado’s November 2021 Rulemaking: ‘Use It or Lose It’ PTO Is Finally Dead, and Other Highlights

On November 10, 2021, after a public hearing and comment submission period, the Colorado Department of Labor and Employment (CDLE) published three final rules: (1) the Colorado Overtime and Minimum Pay Standards Order #38 (COMPS 38), (2) the 2022 Publication and Yearly Calculation of Adjusted Labor Compensation Order (2022 PAY CALC Order), and (3) the updated Wage Protection Rules. All these rules go into effect on January 1, 2022, and have significant implications for employers doing business in the state.

New Wage Protection Rules

Forfeiture of Accrued PTO Is Illegal

As we previously reported, in June 2021 the Colorado Supreme Court in Nieto v. Clark’s Market, Inc., held that Colorado’s Wage Protection Rule 2.17 forbids the forfeiture of any accrued vacation pay in an employment policy or agreement. While Nieto settled the question of the legality of “use it or lose it” vacation policies, it remained an open question whether employer policies providing for the forfeiture of broader paid time off (PTO) policies would be permissible, as such policies provide for leave available for many purposes other than vacation.

The CDLE has now answered that question with the revised Wage Protection Rules, which provide that “[v]acation pay” now means “pay for leave, regardless of its label, that is usable at the employee’s discretion,” as opposed to leave used for narrow circumstances such as illness or bereavement. Because the applicable statute, C.R.S. § 8-4-101(14)(a)(III), already defines wages and compensation to include “vacation pay,” the combined effect of the statute, the Nieto decision, and the new Wage Protection Rules is that any policy or agreement providing for the forfeiture of accrued PTO is illegal in Colorado. Because both PTO and vacation leave may be offered at the employer’s discretion, however, employers may want to consider implementing caps on the amount of PTO or vacation an employee may accrue, so long as such accrued leave is never forfeited.

Pay Rate for Paid Sick Leave

2021 marked the first year of state-mandated paid sick leave in Colorado under the Healthy Families and Workplaces Act (HFWA), and with it came myriad questions about how the pay for HFWA leave should be calculated. The new Wage Protection Rules provide some clarity in this regard. Specifically, the rules clarify that (1) bonuses need not be included in the HFWA pay rate; (2) the HFWA 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 (3) the HFWA pay rate for employees with variable hourly rates should be calculated by adding all the wages for the period in (2), and then dividing that amount by the total number of hours worked for that period. Absent an agreement to the contrary, employees who are “on call” are not entitled to use paid leave unless the employer actually requests the employee to work, or any other hours that would otherwise qualify as “time worked” under the COMPS Order.

While these provisions will assist employers in accurately paying HFWA leave, they highlight the fact that the regular rate of pay calculation for HFWA purposes is significantly different from the regular rate for overtime purposes under the COMPS order.

COMPS 38 and the 2022 PAY CALC Order

Minimum Wage and Salary Thresholds Moved From COMPS to PAY CALC

While not as groundbreaking as its predecessor COMPS orders (COMPS 36 and COMPS 37), COMPS 38 still throws Colorado employers a curveball or two. First, the minimum wage amounts and salary thresholds for certain exemptions have been carved out of COMPS and consolidated in the new 2022 PAY CALC Order, which succinctly lists those figures in table form. Second, the 2022 PAY CALC Order also provides for future annual adjustments, although we expect new PAY CALC orders to be issued annually. Indeed, according to the CDLE’s Statement of Basis and Purpose, a purpose of the PAY CALC Order was to alleviate the need to revise the COMPS orders annually just to update these wage and salary threshold amounts.

Practically, it remains to be seen whether this purpose will be realized. COMPS 38, like its predecessor orders, contains many changes that are not limited to mere updates of the wage and salary thresholds, but the creation of the new PAY CALC Order at least signals the potential for COMPS 38 to last for more than one year. Finally (and importantly), while the creation of the PAY CALC Order gives employers one more order to keep track of, it does not significantly alter the minimum wage and salary thresholds previously established by COMPS 37.

New Highly Compensated Employee Exemption

As we have previously discussed, the CDLE’s official interpretations of the challenging standards for the administrative and executive exemptions have hindered employers’ ability to feel secure that their applications of these exemptions are sound. COMPS 38 provides another option for employers struggling with the application of the stringent duties tests for these white-collar exemptions: a new highly compensated employee exemption. An employee qualifies under this exemption if he or she (1) is paid 2.25 times the rounded annual salary for the executive, administrative, or professional (EAP) salary limit in the PAY CALC Order (for 2022, this amount is $101,250); (2) customarily and regularly performs any one of the exempt duties and responsibilities of an EAP employee; and (3) whose primary duty is office or nonmanual work. This last requirement contains an important distinction from the federal highly compensated employee exemption in the Fair Labor Standards Act (FLSA); while the federal exemption only requires an employee’s primary duty to include office or nonmanual work, Colorado’s exemption requires an employee’s primary duty to be office or nonmanual work. This distinction, coupled with a laundry list of jobs ineligible for the exemption, makes it clear that employees performing manual work are ineligible for the exemption no matter how much they are paid.

Regular Rate of Pay for Employees With Multiple Jobs

COMPS 38 establishes two options for determining the regular rate of pay for employees working multiple jobs at different hourly rates for the same employer:

  • The regular rate may be determined by adding all the wages earned performing each job, then “dividing that amount by the total number of hours worked in all jobs, consistent with the [FLSA], and resulting in a weighted average rate of pay.”

  • Alternatively, the regular rate may be determined by using “the regular rate of hourly pay for the job being performed during the actual overtime hours.”

Employers will likely prefer the second option in situations where most of an employee’s overtime hours are incurred performing a lower-paying job, but a word of caution: without a written agreement with the employee that the second option will be the calculation method used, the first option automatically applies.

Further Narrowing of Other Exemptions and Variances

COMPS 38 also showcases a continuing trend in the state to narrow or eliminate certain job- and employee-specific exemptions. In response to the passage of a recent agricultural law, agricultural workers now must be paid the state minimum wage ($12.56 in 2022), but they may remain exempt from overtime requirements if certain pay and break requirements are met. Agricultural range workers remain exempt from minimum wage requirements if they are paid the minimum salary in PAY CALC of $515 per week. Finally, COMPS 38 eliminates the option to pay employees certified by the CDLE to be less efficient in performance of their job duties due to a disability 15 percent less than the applicable minimum wages.

As in prior years, the CDLE will issue a COMPS 38 poster that must be prominently displayed in the workplace, or provided to employees if a physical posting is impractical. Updated posters may be found here. Another round of rulemaking is also coming in December, to include potentially significant changes to the Colorado Whistleblower, Anti-Retaliation, Non-Interference, and Notice-Giving Rules (Colorado WARNING Rules).

© 2022, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.National Law Review, Volume XI, Number 315
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About this Author

Michael H. Bell Shareholder Denver, Dallas Traditional Labor Relations, Employment Law, Litigation
Shareholder

Michael (“Mike”) Bell represents employers in all aspects of labor and employment law,  focusing his practice on the defense of discrimination, harassment, and retaliation claims, employment-related torts, and civil rights claims under state and federal law.  A native of Charlotte, North Carolina, Mr. Bell obtained his bachelor’s degree, summa cum laude, in English and History from Appalachian State University.  He received his law degree from the University of North Carolina at Chapel Hill, where he captained the school’s Environmental Negotiation Moot Court team.  Mr. Bell is...

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