Amid legislative efforts to raise the federal minimum wage, the Colorado minimum wage is set to go up by 23 cents to $8.23 per hour automatically on January 1, 2015.  The state minimum wage is adjusted annually for inflation, as required by Article XVIII, Section 15, of the Colorado Constitution.  The minimum wage for tipped employees will be $5.21 per hour.

Employees Subject to the Colorado Minimum Wage

Colorado employees are entitled to the state minimum wage in two situations, namely if covered by (1) Colorado Minimum Wage Order Number 31 (Minimum Wage Order); or (2) the minimum wage provisions of the federal Fair Labor Standards Act (FLSA).  The Minimum Wage Order applies to certain employers/employees for work performed within the state of Colorado in the following four industries:

  1. Retail and Service
  2. Commercial Support Service
  3. Food and Beverage
  4. Health and Medical

Each industry is defined within the Minimum Wage Order.  Employers covered by the Minimum Wage Order must comply with not only the minimum pay requirements, but also obligations related to meal and rest periods, overtime pay, uniforms, recordkeeping and other labor standards.

Employees subject to the minimum wage provisions of the FLSA (and therefore, also entitled to the Colorado minimum wage) include those non-exempt workers performing work involved in interstate commerce and those working for a business or organization that has two or more employees and has an annual dollar volume of business of at least $500,000 or a hospital, school, government agency or residential medical or nursing facility, regardless of annual sales. 

If an employee is subject to both the state and federal minimum wage laws, they are entitled to be paid the higher of the two hourly minimum rates of pay.  At present rates, the $8.23 Colorado minimum wage trumps the federal $7.25 minimum hourly rate so employers must pay their non-exempt employees working in Colorado at the higher Colorado rate.

Inflation Adjustment Based on Consumer Price Index

The Constitutionally required annual adjustment in the Colorado minimum wage is measured by the Consumer Price Index (CPI) for Colorado.  According to the federal Bureau of Labor Statistics, the CPI for the Denver-Boulder-Greeley metropolitan area of Colorado increased 2.9 percent from the first half of 2013 to the first half of 2014.  The overall increase was driven by a nearly 5.0 percent increase in costs for housing as well as a 3.9 percent increase in energy costs and a 2.0 percent increase in food prices.  The 2.9 percent raise in the CPI for Colorado was then applied to the 2014 state minimum wage of $8.00 per hour, resulting in a 23 cent per hour increase in the minimum wage for 2015.

Plan Now for the January 1st Wage Increase

Businesses and organizations with employees who are subject to Colorado’s minimum wage should take steps now to update their payroll systems and practices in order to implement the new minimum wage on January 1, 2015.  Employers that use an outside payroll vendor should confirm that the payroll provider has programmed the new Colorado minimum wage in their systems to take effect on January 1.  Note, too, that employers subject to the Colorado Minimum Wage Order must post a copy of the new Minimum Wage Order in their workplace in an area frequented by employees where it may be easily read during the workday.  The Colorado Department of Labor and Employment, Division of Labor, provides a copy of Minimum Wage Order Number 31 at https://www.colorado.gov/pacific/sites/default/files/Proposed%20Wage%20Order%2031%20Rules%209-30-14.pdf.