Effective March 16, 2020, virtually all private employers in Colorado will be subject to the Colorado Department of Labor and Employment, Division of Labor Standards and Statistics’ new Colorado Overtime and Minimum Pay Standards Order Number 36 (“COMPS Order 36”). COMPS Order 36 replaces prior Minimum Wage Orders, which covered only four industries, and expands Colorado overtime, meal and rest break, and travel time requirements, as well as exemption tests, among other rules, to virtually all private employers in the state.
COMPS Order 36 deviates in important ways from the federal Fair Labor Standards Act (FLSA), including by defining any tasks taking over one minute as “time worked,” eliminating any de minimis exception, and requiring workers to actually cross state lines to be engaged in interstate commerce. Employers must post a COMPS Order 36 poster, distribute it to employees, and obtain employees’ signed acknowledgement of receipt. And, effective January 1, 2021, COMPS Order 36 establishes minimum salary thresholds higher than those under the FLSA that employees must earn – in addition to meeting the applicable duties test – to be exempt from overtime requirements.
The greatest change in COMPS Order 36 is its expanded coverage. Prior Wage Orders covered only four industries: Retail/Service, Food/Beverage, Health/Medical, and Commercial Support Service. COMPS Order 36 covers all private sector employees, unless explicitly exempted by the Order as further discussed below. Thus, for the first time on March 16, 2020, a vast swath of private sector employers will be subject to Colorado’s overtime, meal and rest break, travel time, and exemption rules that previously were limited to four discrete industries.
As of January 1, 2020, Colorado statutes also broadened the definitions of covered “employees” and “employers” in Colo. Rev. Stat. 8-4-101(5), (6). COMPS Order 36 has adopted these broadened definitions. Specifically, an “employee” is defined as “any person, including a migratory laborer, performing labor or services for the benefit of an employer,” except that the definition does not include independent contractors who meet the criteria set forth in the statute and COMPS Order 36. In defining an “employer,” COMPS Order 36 incorporates the definition under the FLSA, with some minor exceptions.
Exemptions from COMPS Order 36 and Increased Salary Thresholds
Rule 2 of COMPS Order 36 provides for exemptions from the Order, or portions of the Order, based on specific criteria. While there is substantial overlap between these exemptions and those available under the FLSA, there are also some key differences. These exemption definitions are the same as in prior Minimum Wage Orders, but now apply across the private sector, not just to the four previously covered industries.
Employees identified under Rule 2.2 are exempt from COMPS Order 36, except for Rule 1 (Authority and Definitions), Rule 2 (Coverage and Exemptions), and Rule 8 (Administration and Interpretation). The following employees are exempted under Rule 2.2, provided that their position – based on actual job duties, as opposed to their job description – meets the criteria set forth in the Order:
- Administrative Employees. This exemption covers salaried employees who directly serve the executive and regularly perform duties important to the decision-making process of the executive. Similar to the administrative exemption under the FLSA, the employee must regularly exercise independent judgment and discretion in matters of significance, with a primary duty that is non-manual in nature and directly related to management policies or general business operations of the employer.
- Executives or Supervisors. This exemption covers salaried employees who supervise the work of at least two full-time employees and have the authority to hire and fire, or to effectively recommend such action. This exemption varies in several ways from the FLSA’s executive exemption, most critically because it includes a quantitative requirement that the employee spend a minimum of 50% of the workweek in duties directly related to supervision.
- Professional Employees. This exemption covers salaried employees employed in a field of endeavor who have knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction and study. To qualify for this exemption, employees must be employed in the field in which they were trained.
- Outside Salespersons. This exemption covers employees working primarily away from the employer’s place of business or enterprise for the purpose of making sales or obtaining orders or contracts for any commodities, articles, goods, real estate, wares, merchandise, or services. Unlike the FLSA’s outside sales exemption, COMPS Order 36 requires that outside sales employees spend a minimum of 80% of the workweek in activities directly related to their own outside sales.
As under prior minimum wage orders, COMPS Order 36 does not recognize the creative professional or highly compensated exemptions available under federal law.
New to COMPS Order 36 are increased salary thresholds that, beginning January 1, 2021, exceed the requirements of the FLSA. These thresholds must be met to qualify under the administrative, executive/supervisor, and professional (with some exceptions) exemptions, as follows:
As under federal law, deductions may be made from the above salary requirements only under limited circumstances. Notably, the salary requirement does not apply to the outside salesperson exemption under COMPS Order 36. There are narrow exceptions for qualifying doctors, teachers, lawyers, and employees in highly technical computer-related occupations.Thereafter, the salary requirement will be adjusted based on the same Consumer Price Index (CPI) as the Colorado minimum wage. Notably, the July 1, 2020 salary threshold is the same threshold that already went into place on January 1, 2020 under the FLSA, so most Colorado employers will not need to make any salary adjustments until January 1, 2021. Employers should note that salaried exempt employees must still be paid Colorado minimum wage for all hours worked. As such, for employees paid near the minimum salary level who work a high number of hours, it may be necessary to pay additional compensation in workweeks where the employee works a great number of hours. In addition, exempted from the 2020 threshold are non-profits with annual gross revenue under $50 million, as well as for-profit employers with an annual total gross revenue under $1 million. However, these entities must comply beginning January 1, 2021.
Additional exemptions under Rule 2.2 exist for qualifying owners and proprietors, interstate transportation workers and taxi cab drivers, in-residence workers, range workers in jobs related to herding or production of livestock, field staff of seasonal camps or outdoor education programs, bona fide volunteers and work-study students, and elected officials and their staff. COMPS Order 36 sets forth detailed criteria for each of these exemptions. Critically, interstate transportation workers (many of whom would qualify for exemption from the FLSA under the Motor Carrier Act exemption) are required to actually cross state lines, as opposed to merely transporting goods in the chain of interstate commerce, to be engaged in interstate commerce.
COMPS Order 36 eliminates the exemption for companions and domestic workers employed directly by households or family members to work in private residences. It adds an exemption for the highest-ranked and highest paid employee of a non-profit, as long as that person is paid within the minimum salary threshold discussed below.
In addition, COMPS Order 36 adds an “owners” exemption, which mirrors federal law and provides that full-time employees who manage a business and have at least 20% bona fide equity interest in the business do not need to receive a salary to be exempt from the Order.
Subject to the specific requirements set forth in COMPS Order 36, agricultural jobs are exempt from the Order’s overtime and meal period rules. Agricultural jobs that are exempt from the federal minimum wage are also exempt from the Colorado minimum wage.
Finally, COMPS Order 36 exempts certain categories of employees from its overtime rule. This applies to certain salespersons and mechanics, qualifying commission sales employees, certain employees in the ski industry, and qualifying medical transportation workers.
Meal and Rest Periods
While COMPS Order 36 does not change the requirements under Colorado law with respect to meal and rest periods, it provides clarification on a number issues where there was previously confusion. Under Colorado law, for shifts in excess of five hours, employees are entitled to an uninterrupted, duty-free, 30-minute meal period. Employees must be completely relieved of all duties and permitted to pursue personal activities, including by leaving the premises if desired. COMPS Order 36 provides that, to the extent practical, meal periods must occur at least one hour after starting and one hour before ending shifts.
Where an uninterrupted or off-duty meal period is impractical, such as when an employee is single-staffed and required to monitor the phones during their meal period, the employee must be permitted to consume an on-duty meal while performing duties. This is considered an “on-duty meal period,” and that time must be compensated.
Rule 5.2 of COMPS Order 36 clarifies prior Minimum Wage Order language that required rest periods for each four hours of work or “major fraction thereof.” COMPS Order 36 makes clear that a “major fraction” means two hours. Therefore, employers must authorize or permit 10-minute, off-duty rest periods for every four hours of work, in accordance with the following chart:
COMPS Order 36 provides two narrow exceptions from the requirement that employers provide 10-minute, off-duty rest periods for every four hours worked. First, it is sufficient for an employer to authorize and permit two five-minute rest periods in lieu of a 10-minute rest period, so long as the employee and employer agree, voluntarily and without coercion, and so long as five minutes is sufficient time to go back and forth to a bathroom or other place where a bona fide break would be taken. Second, if the employee’s work is agricultural, qualified Medicaid-funded home care, or subject to a collective bargaining agreement, then rest periods can be five minutes in a four-hour period, so long as the employee’s rest periods average 10 minutes per four hours over the course of the workday.Rest periods are required to be compensated. Unlike with meal periods, employers need not permit employees to leave the premises for their rest periods. To the extent practical, rest periods should fall in the middle of each four-hour work period.
Most significantly, if an employee is not authorized and permitted to take a required rest period, COMPS Order 36 states that the employee is entitled to 10 minutes of additional pay. The Division of Labor Standards and Statistics (Division) has taken the position that a full additional 10 minutes of pay is required even if the employee takes a shortened rest period. For example, if an employee is called back to work seven minutes into his or her rest period, the employer owes 10 extra minutes of pay, not just seven. Critically, if an employee voluntarily chooses to work during his or her rest period, additional pay is not required. Employers are required to “authorize or permit” rest periods but are not required to ensure they are taken.
"Time Worked" Includes Any Task Taking Over One Minute
COMPS Order 36 defines compensable “time worked” as all time performing labor or services for an employer’s benefit, including all time employees are suffered or permitted to work, whether or not required. It includes time employers permit or require employees to be on the premises, on-duty, or at prescribed workplaces, but does not include merely permitting an employee completely relieved from duty to arrive or remain on the premises.
In a significant departure from federal law, COMPS Order 36 defines any tasks taking over one minute as “time worked.” Some examples of “time worked” referenced in COMPS Order 36 include time spent putting on or removing required work clothes or gear, but not uniforms worn outside work as well; remaining at work awaiting a decision on a job assignment or when to begin work; receiving or sharing work-related information; performing clean-up or other duty “off-the-clock;” security or safety screening; clocking or checking in or out; and waiting to perform any of these tasks. Under the FLSA, courts have held that employers do not have to pay employees for insignificant and infrequent periods of time of up to a few minutes (the “de minimis” exception). The COMPS Order rejects those decisions and imposes a much more onerous requirement that employers generally pay for any time worked over one minute.
For employers covered by prior Minimum Wage Orders, COMPS Order 36 provides some clarification, but does not materially change, their obligations with respect to pay for travel time, as the prior orders defined travel time as “all time spent at the control or direction of an employer, excluding normal home to work travel.” This definition is significantly more expansive than the definition of compensable travel time under the FLSA (as amended by the Portal to Portal Act), however, imposing heightened obligations on employers not in one of the four previously covered industries.
In addition, COMPS Order 36 clarifies that “at the start or end of the workday, travel to or from a work station, entirely within the employer’s premises and/or with employer-provided transportation” is not time worked unless it: (a) otherwise falls under the definition of “time worked” discussed above; (b) is after compensable time starts or before compensable time ends; or (c) is travel in employer-mandated transportation, which materially prolongs commute time or subjects employees to heightened physical risk compared to an ordinary commute.
Deductions, Credits, and Charges
Under COMPS Order 36, employers are no longer allowed to require a security deposit for a required uniform. COMPS Order 36 also clarifies the meal credit requirement. In prior minimum wage orders, the meal credit requirement stated the employee had to consume the meal before the deduction was permitted. COMPS Order 36 provides that an employer may not reduce wages for a meal, unless the employee accepts the meal voluntarily and without being coerced. COMPS Order 36 raises the threshold for the lodging deduction and adds requirements similar to federal law specifying that the employee must voluntarily accept the lodging and that the lodging must be appropriately documented.
The Colorado minimum wage is set forth in the state constitution, and for 2020 is $12.00 per hour, or $8.98 per hour for tipped employees. Tipped employees are those engaged in an occupation in which they customarily and regularly receive more than $30.00 per month in tips.
If a local government has enacted a higher minimum wage – a practice that has surged due to recent legislation in Colorado – work covered by the local minimum wage ordinance must be paid at that higher wage.
The minimum wage can be reduced by up to 15%, even if federal law permits lower wages, for non-emancipated minors and for persons certified by the Division as less efficient due to physical disability. Additionally, COMPS Order 36 allows employers to take a credit towards minimum wage in several narrowly defined circumstances, including through a lodging credit, meal credit, or tip credit. Additional deductions set forth in Rule 6 of COMPS Order 36, including for uniforms, or in Colorado’s wage deductions statute, Colo. Rev. Stat. 8-4-105, are also permitted.
Newly covered employers will now have to abide by the Colorado overtime rules requiring employers to pay 1½ times the employee’s regular rate of pay for work beyond 40 hours per week, 12 hours per day, or 12 consecutive hours of work, whichever results in the higher payment of wages. Rule 1.8 of COMPS Order 36 sets forth which items are included in the calculation of an employee’s regular rate of pay, as well as how to calculate the regular rate for those employees who are paid a weekly salary or on some other non-hourly basis. Employers should be mindful that certain payment that are excluded from the regular rate of pay under the FLSA are not expressly excluded by COMPS Order 36, leading to a potential need to run separate state and federal overtime calculations.
COMPS Order 36 specifically sets forth the circumstances under which Colorado employers may use the “fluctuating workweek” method of calculating overtime, under which the regular rate of pay is calculated based on all hours worked in the week and overtime is paid at 0.5 times the regular rate. The language closely tracks the applicable FLSA regulation and provides that Colorado employers may use the fluctuating workweek method only where the parties have a “clear mutual understanding” that this method will be used. Otherwise, the regular rate of pay must be calculated based on the assumption of 40 hours worked in the week, and overtime must be paid at 1.5 times the regular rate. As under federal law, hours in two or more weeks cannot be averaged in computing overtime. Nor may employers provide time off, or “comp time,” in lieu of paying time and a half for overtime hours.
Record-Keeping, Wage Statement, and Posting Requirements
Rule 7 of COMPS Order 36 includes extensive requirements for employers with respect to record-keeping, wage statements, and posting and distribution of COMPS Order 36. It is important to understand these requirements, as immediate action is required for compliance.
Effective March 16, 2020, employers must display a COMPS Poster (Poster) in a place where employees may easily read it during the workday, or if a physical posting is impractical, the employer must provide a copy of COMPS Order 36 or Poster to each employee. Employers must also make a copy of COMPS Order 36 or Poster available upon any employee’s request. For new hires, distribution must be made within the first month of employment. While COMPS Order 36 does not contemplate monetary penalties for failure to comply with the posting requirements, it provides that failure to comply may result in ineligibility for employee-specific credits, deductions, or exemptions.
Moreover, employers with any employees with limited English language ability are required to either post a Spanish-language version of COMPS Order 36 and Poster or contact the Division to request that the Division provide a copy of COMPS Order 36 and Poster in another language.
Significantly, if an employer distributes a handbook, a manual, or written or posted policies to employees, as many employers do, it must include a copy of COMPS Order 36 or Poster. Employers that require their employees to sign an acknowledgment of receiving those materials, such as the commonly used handbook acknowledgment, must also require a signed acknowledgement that employees were provided a copy of COMPS Order 36 or Poster. In an abundance of caution, employers can ensure compliance by providing a copy of COMPS Order 36 or Poster to everyone in their current workforce on or about March 16, 2020 and obtaining a signed acknowledgment. Based on informal guidance form the Division, it may also be compliant to simply append the COMPS Order or Poster onto accessible electronic handbooks. On a go-forward basis, employees should be required to acknowledge COMPS Order 36 or the Poster (which may be part of the handbook) at hire.
Under Rules 7.1 and 7.3, employers are required to maintain records of an employee’s (a) name, address, occupation, and date of hire; (b) date of birth, if the employee is under 18 years of age; (c) daily record of all hours worked; (d) record of credits claimed and of tips; and (e) regular rates of pay, gross wages earned, withholdings made, and net amounts paid each pay period. These records must be maintained for a period of at least three years and for the duration of any pending wage claim pertaining to a given employee. While Rule 7.2 appears to require that this information be provided to each employee each pay period, informal guidance from the Division indicates that the Division intended to ensure that this information be available to employees and the Division itself only upon request during an investigation, not included on pay stubs.
Pay stubs still must comply with the Colorado Wage Act’s required pay statement elements, however, including: (a) gross wages earned; (b) all withholdings and deductions; (c) net wages earned; (d) inclusive dates of the pay period; (e) name of the employee or the employee’s Social Security number; and (f) name and address of the employer. See C.R.S. § 8-4-103(4).
The Division is expected to periodically issue additional guidance regarding COMPS Order 36 through Interpretive Notice and Formal Opinions (“INFOs”). We will be carefully monitoring the state’s interpretation and enforcement of these new legal requirements leading up to the effective date of COMPS Order 36 on March 16, 2020 and thereafter.