Colorado’s Department of Labor and Employment (CDLE) ended its 2021 legislative rulemaking session on November 10, 2021 with the publication of three final rules:

• Updated Wage Protection Rules (Rules)
• Overtime and Minimum Pay Standards Order #38 (COMPS 38); and
• The 2022 Publication and Yearly Calculation of Adjusted Labor Compensation Order (2022 PAY CALC Order)

The January 1, 2022, effective date for each of these final rules impacts employers across the state.

No more “use it or lose it” provisions
As discussed here, Colorado’s Supreme Court’s landmark ruling in June 2021 made clear that an employer must pay an employee earned, but unused, vacation pay upon separation from employment. To assist in implementing this new standard, the updated Rules provide additional clarification on the issue of whether employer policies providing for the forfeiture of broader paid time off (PTO) policies would be permissible when they provide for leave available for reasons other than vacation.

The Rules clarify that “[v]acation pay” now means “pay for leave, regardless of its label, that is usable at the employee’s discretion.” This now makes clear that any policy or agreement providing for the forfeiture of accrued PTO is an unlawful employment practice. Employers concerned about the amount of PTO or vacation time an employee may accrue may want to consider capping the amount of PTO or vacation an employee may accrue; keeping in mind that these types of accrued leave cannot be forfeited.

Paid Sick Leave: Pay Rate
The Rules also provide clarity on how pay under the newly implemented Healthy Families and Workplaces Act (HFWA) should be calculated. Specifically,

• Bonuses need not be included in the HFWA pay rate
• Pay 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
• Pay rate for employees with variable hourly rates should be calculated by adding all the wages for the period referenced above, and then dividing that amount by the total number of hours worked for that period.

Changes: COMPS 38 AND PAY CALC Order
COMPS 38 includes two significant changes from prior COMPS:

• Places minimum wage amounts and salary thresholds for certain exempt positions into the 2022 PAY CALC Order; and
• Creates a new “highly compensated” employee exemption.

The new 2022 PAY CALC Order provides updated minimum pay and income levels for minimum wage earners and specific exempt positions along with future adjustments in an easily readable table format.

According to the CDLE’s Statement of Basis, Purpose, Specific Statutory Authority, and Findings, moving the pay and income levels to the PAY CALC Order should alleviate the need for an annual update to the COMPS Order where the only changes are related to pay and income levels. It is also hoped that this revision will improve accessibility to key information such as minimum wage and exemption salary changes.   

The new highly compensated employee exemption will apply where an employee:

• Is paid 2.25 times the rounded annual salary for the executive, administrative, or professional salary limit in the PAY CALC Order (for 2022, this amount is $101,250)
• Customarily and regularly performs any one of the exempt duties and responsibilities of an executive, administrative or professional employee; and
• Whose primary duties are office or nonmanual work[i]

COMPS 38 also reflects recent changes in minimum wages laws applicable to agricultural workers. Starting in 2022 the minimum wage for agricultural workers will be $12.56 (state minimum). Agricultural workers will remain exempt from overtime requirements where certain pay and break requirements are met and can be exempt from minimum wage requirements if paid a minimum salary of $515 per week.

Lastly, COMPS 38 takes a monumental step – in keeping with California’s newly ended legislative session – in eliminating an employer’s ability to pay those with disabilities less than minimum wage.

The end of another legislative session is also the perfect time to remind Colorado employers that they must comply with CDLE posting requirements.