Your HR Pro

Wage theft by employers continues to be a major concern in Colorado. Beginning January 1, 2023, penalties will increase in severity for employers who withhold wages unlawfully.

The definition of wages includes bonuses, commission, vacation pay, and sick pay per any agreement between the employer and employee. As an employer, your agreements with your employees about all forms of compensation should be documented in plain language and acknowledged by the employee. Don’t forget to update your compensation agreements as needed.

Penalties for withholding pay unlawfully can result in up to quadruple the damages on wage claims. If the claim is $10,000 in unpaid wages, your company’s total liability can be $40,000, including penalties and compensatory damages. That can have a significant impact on your business.

Employers can see this change to the Colorado Wage Act as an opportunity to build a competitive advantage over other employers. With labor laws becoming more complex in Colorado, not every employer will stay compliant. This is where your company can shine. Use this opportunity to provide clear communications with your employees regarding their compensation.

One idea is to issue an individual letter to each employee once a year (perhaps on their employment anniversary) thanking them for their service, providing a complete picture of their compensation and benefits, announcing any cost of living adjustments or bonus/commission eligibility, and including a section on what wages are subject to payment upon termination.

Bottom Line

Here’s what your company should do in preparation for the new provisions:

1. Policies. Ensure your handbook covers payout upon termination for all forms of wages included in the act, including wages, bonuses, commissions, vacation pay, and sick pay, and any exclusions to these payments as allowed by law.
2. Agreements. Provide training to your managers about constructing appropriate agreements with employees regarding compensation and ensure any amendments are provided to HR for prior approval before presenting them to the employee. Also, review your offer letter templates for compliance.
3. Respond to “Good Faith” Demands. When an employee requests payment of withheld wages in writing, your company must review those demands and decide within 14 days what the company feels is owed to the employee and make the payment. The courts are still deciding what “good faith” means, so give extra care when responding to these inquiries and ensure your response and payment are received by the employee no later than 14 days after their demand.

For more information, download the Colorado Wage Act.

Disclaimer. Your HR Pro are not attorneys and do not provide legal counsel. The information provided here is a recommendation for your consideration and review with your legal counsel.