Colorado is raising the stakes for employers when it comes to compliance obligations and increased enforcement with the enactment of House Bill 25-1001 (the Law).
The Law amends the Colorado Wage Act and goes into effect August 6, 2025. It provides additional protections for employees and workers and consequently increases the risks for noncompliance.
This alert provides a practical list of what employers need to know.
Potential Personal Liability for Minority Owners
The Law opens the door to employees holding minority owners personally liable for wage and hour violations. It expanded the definition of “employer” to includes anyone that owns or controls at least 25% percent of the ownership interests in an employer. “Employer” does not include minority owners who can demonstrate “full delegation” of their authority “to control day-to-day operations.” Consequently, “hands-off” minority owners may not be subject to personal liability, but minority owners who are involved in running a business should be mindful of the potential risks.
Waiver of Automatic Penalties
Under the current law, if an employer fails to pay wages within fourteen (14) days of a written demand by an employee, the employer is liable for the unpaid wages and a substantial automatic penalty[1] payable to the employee. In a positive change for employers, the law allows the Director of the Colorado Department of Labor and Employment (CDLE) Division of Labor Standards and Statistics (Division) to waive the previously automatic penalty if the employer pays the demand within fourteen (14) days after an administrative claim is served. However, there will be no waivers for second or subsequent violations within five (5) years. The availability of a waiver may give employees and employers breathing room to negotiate and resolve wage demand disputes without the threat of an automatic penalty (to the extent such negotiations occur before an administrative claim is sent and/or there were no previous issues in the last 5 years).
Increasing Fines for Misclassifying Employees
The Law establishes harsh fines for employers who misclassify employees as non-employees. Fines are payable to the Division and are assessed per employee as follows:
- $5,000 for a willful violation.
- $10,000 for a violation not remedied within sixty (60) days after the Division’s finding of misclassification.
- $25,000 for a second or subsequent willful violation within five (5) years.
- $50,000 for a second or subsequent willful violation not remedied within sixty (60) days after the Division’s finding of misclassification.
Starting January 1, 2028, and every two years after, these amounts will be adjusted for inflation. These fines are in addition to any other relief ordered.
Increased Administrative Jurisdiction Over Claims
Currently, the Director of the Division may adjudicate wage claims of $7,500 or less. The Law increases this threshold over the coming years. For claims filed between July 1, 2026 and December 31, 2027, the threshold will be adjusted to $13,000 or less. By January 1, 2028, and every other year thereafter, the Director will increase the threshold amount by at least $1,000 or such other amount required to adjust for inflation.
Public Disclosure of Violations and Licensing Ramifications
The Law requires that the Director, upon finding a violation of the Colorado Wage Act, must publish on its website: (1) the citation, (2) determination or written opinion, (3) whether the violation was willful, and (4) the names of the employer that was found to be in violation. This information will be publicly available.
Additionally, upon finding violations, the Director has reporting obligations and options to government bodies with authority over the employer’s license, permit, registration, or credentials. If the violation was willful and is not remedied within 60 days, the Director must report that violation to any government body with authority over the employer’s license, permit, registration, or credentials. In contrast, if the violation is not willful, the Director may report an employer found to be in violation to such a government body. Any decision the government body makes regarding the employer may be posted to the Division’s website. This reporting to other government bodies could result in restrictions on the employer’s ability to carry on business depending on the actions such government bodies take.
Expanding Enforcement
The Law expands the ability to enforce wage laws not only to a county or city district attorney, but also to any “persons” to whom they delegate authority. Additionally, counties and cities can now enact and enforce their own laws regarding payment of wages as long as they are no less protective than the Colorado Wage Act.
This expansion in enforcement options may lead to increased oversight and investigations.
Retaliation Protections Strengthened for Employees and Added for Workers
To start, the Law expands liability for retaliation to include not only employers, but also any other person who is regularly engaged in business that has contracted with an employer or worker for labor.
The Law enhances retaliation protections in the following additional ways:
- Stating that any adverse action taken by employers within ninety (90) days of a protected activity may, by itself, be sufficient to find retaliatory intent.
- Forbidding the use of an individual’s immigration status to discriminate or retaliate against a worker who has engaged in protected activity.
- Providing that employees and workers are able to seek compensatory damages for other economic or noneconomic loss or injury.
- Providing the Division with authority to award reasonable attorney’s fees and costs to the aggrieved person.
Reduced Availability of Attorney’s Fees for Employers
The Law makes it more difficult for employers to be awarded their attorneys’ fees incurred in defense of claims under the Colorado Wage Act. It indicates that attorney’s fees are only available when an employer makes a full tender of the amount demanded in good faith within fourteen (14) days of a wage demand and the court finds the employee pursued the action without substantial justification.
Right to Sue for Equitable Relief
The Law authorizes equitable relief for employees bringing claims under the Colorado Wage Act or any other law or rule related to wages or hours. Equitable relief may include orders to prevent future violations and orders to prevent unjust enrichment of employers failing to pay wages. Equitable relief can be pursued alongside any other available remedy.
Compliance with wage and hour laws is always important, however, the enactment of House Bill 25-1001 brings increased risks for noncompliance for Colorado employers. Employers should monitor compliance and consult counsel as needed.
[1] The penalty is: “(I) The greater of two times the amount of the unpaid wages or compensation or one thousand dollars; or (II) If the employee can show that the employer’s failure or refusal to pay wages or compensation was willful, the greater of three times the amount of the unpaid wages or compensation or three thousand dollars.”
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