Chapter 20 - § 20.2 • COLORADO LAW ON WAGES

• Jurisdiction: Colorado

§ 20.2 • COLORADO LAW ON WAGES

§ 20.2.1—The Colorado Wage Claim Act

General Purpose and Construction of the Wage Claim Act

The starting point for any discussion of the law of wages and benefits in Colorado is the Colorado Wage Claim Act, C.R.S. §§ 8-4-101, et seq. (Wage Claim Act, CWCA, or Act). Originally enacted in 1901, the Act was extensively amended and renumbered in 2003. The CWCA was most recently amended in 2019. The legislative history of the Act, and the case law interpreting it, provide that the "Act should be liberally construed to carry out its beneficent purpose of assuring timely payment of wages and providing adequate judicial relief when wages are not paid." Cusimano v. Metro Auto, Inc., 860 P.2d 532, 534 (Colo. App. 1992) (citing Hofer v. Polly Little Realtors, Inc., 543 P.2d 114 (Colo. App. 1975)). As such, the Act "provides a clear, comprehensive statutory scheme designed to require an employer to pay wages . . . in a timely manner." Lambdin v. District Court, 903 P.2d 1126, 1129 (Colo. 1995).

The Act applies to employees while still employed, as well as after the employment relationship is terminated. One section of the Act requires payment of wages during employment, C.R.S. § 84-103. However, most disputes arise after the termination of employment and are subject to a different section, C.R.S. § 8-4-109. "The two sections are mutually exclusive." Hofer, 543 P.2d at 116.

Employers and Employees Subject to the Act

The Act applies only to private sector employees and employers. C.R.S. § 8-4-101(6). The definitions of these terms changed significantly in amendments effective January 1, 2020. See House Bill 19-1267, available at http://leg.colorado.gov/sites/default/files/2019a_1267_signed.pdf. Practitioners should exercise caution in relying on decisions construing "employer" and "employee" status under previous versions of the Act.

Effective January 1, 2020, "'Employer' has the same meaning as set forth in the federal 'Fair Labor Standards Act', 29 U.S.C. Sec. 203(d)." C.R.S. § 8-4-101. The FLSA defines that term expansively, to capture "any person acting directly or indirectly in the interest of an employer in relation to an employee." 29 U.S.C. § 203(d). The FLSA defines employment in an open-ended fashion as that which "includes to suffer or permit to work." 29 U.S.C. § 203(g) (emphasis added). "A broader or more comprehensive coverage of employees . . . would be difficult to frame." United States v. Rosenwasser, 323 U.S. 360, 362 (1945). Upon the FLSA's enactment, then-Senator Hugo Black "said on the floor of the Senate that the term 'employee' had been given 'the broadest definition that has ever been included in any one act.'" Id at 363 n. 3 (quoting 81 Cong. Rec. 7657).

The FLSA definitions were borrowed from state child labor statutes, which extended liability to any party that knowingly benefitted from another's use of child labor. See Bruce Goldstein et al., "Enforcing Fair Labor Standards in the Modern American Sweatshop: Rediscovering the Statutory Definition of Employment," 46 UCLA L. Rev. 983, 1030-48, 1088-1100, 1106 (April 1999); see also Rutherford Food v. McComb, 331 U.S. 722, 726 n. 7 (1947). "In enacting FLSA, Congress sought to make business owners responsible for child labor standards as well as paying minimum and overtime wages to workers for whom they could easily disclaim responsibility at common law." Non-Traditional Workers & the Employment Laws, § 4 Independent Contractors & Joint Employee Liability (MCLE Publishing). The FLSA test determining employee versus independent contractor status measures "economic dependency." Donovan v. DialAmerica Mktg., Inc., 757 F.2d 1376, 1385 (3d Cir. 1985) (economic dependency "does not concern whether the workers at issue depend on the money they earn for obtaining the necessities of life, as the district court suggests. Rather, it examines whether the workers are dependent on a particular business or organization for their continued employment."). The multi-factor test guiding the totality of circumstances inquiry a court undertakes to determine the economic realities was enunciated in United States v. Silk, 331 U.S. 704 (1947), a Social Security Act case subsequently applied to the FLSA. See Rutherford Food, 331 U.S. at 723; Dole v. Snell, 875 F.2d 802, 805 (10th Cir. 1989); Scantland v. Jeffry Knight, Inc., 721 F.3d 1308, 1311-12 (11th Cir. 2013). Case law applying this test is collected and summarized in U.S. DOL Wage and Hour Administrator's Interpretation No. 2015-1 (July 15, 2015), entitled "The Application of the Fair Labor Standards Act's 'Suffer or Permit' Standard in the Identification of Employees Who Are Misclassified as Independent Contractors" available at www.blr.com/html_email/AI2015-1.pdf. While the Department of Labor withdrew AI No. 2015-1 effective June 7, 2017, that withdrawal has no effect on the validity of the authorities collected therein.

The legislative history of the 2019 amendments to the CWCA states the General Assembly's intention to overturn Leonard v. McMorris, 63 P.3d 323 (Colo. 2003), which had shielded individuals from employer liability under the former CWCA. See House Bill 19-1267, § 1(1)(b), available at http://leg.colorado.gov/sites/default/files/2019a_1267_signed.pdf. By contrast, "[t]he overwhelming weight of authority is that a corporate officer with operational control of a corporation's covered enterprise is an employer along with the corporation, jointly and severally liable under the FLSA for unpaid wages." Donovan v. Agnew, 712 F.2d 1509, 1511 (1st Cir. 1983) (collecting cases). It should be noted that the CWCA's incorporation of the FLSA references the statute itself and not its implementing regulations, 29 C.F.R. Part 776.

The concept of joint employment is recognized in the CWCA; multiple entities or individuals may have simultaneously employed a plaintiff and may be jointly liable for unpaid wages and penalties. Solis v. Circle Grp., LLC, 2017 U.S. Dist. LEXIS 51936, at *9 (D. Colo. Apr. 5, 2017). The Act does not apply to the state or its agencies or entities, counties, cities, municipal corporations, quasi-municipal corporations, school districts, or districts organized under the laws of the State of Colorado. C.R.S. § 8-4-101(6).

The CWCA defines the covered "employee" to exclude independent contractors from the Act. It should be noted, however, that the 2019 amendments significantly revised the definition of that term. Again, practitioners should take care when relying on authority decided under the CWCA's prior definition of "employee." Effective January 1, 2020:

"Employee" means any person, including a migratory laborer, performing labor or services for the benefit of an employer. For the purpose of this Article 4, relevant factors in determining whether a person is an employee include the degree of control the employer may or does exercise over the person and the degree to which the person performs work that is the primary work of the employer; except that an individual primarily free from control and direction in the performance of the service, both under his or her contract for the performance of service and in fact, and who is customarily engaged in an independent trade, occupation, profession, or business related to the service performed is not an "employee."

C.R.S. § 8-4-101(5). The 2019 Amendment added the "primary work" factor to the preexisting test and removed a prior emphasis on employer control of "when, where, and how much labor or service shall be performed." CWCA § 101(5) as amended parallels the California employee status test enunciated in Dynamex Operations West v. Superior Ct., 416 P.3d 1 (CA 2018) as subsequently codified at California Labor Code § 2750.3(a)(1). Both statutes now decide independent contractor status based on: (1) the presence of potential or exercised control over work; (2) whether the worker performs the primary work of the hiring entity's business; and (3) whether the worker is customarily engaged in independent business of the same nature as the work performed. Authority decided under Cal. Lab. Code § 2750.3 may be persuasive in the construction of the Colorado Wage Claim Act. See e.g., Vazquez v. Jan-Pro Franchising, 923 F.3d 575 (9th Cir. 2019). It should be noted, however, that the California and Colorado tests diverge on the allocation of burdens of proof and on the weighting of factors. While California places the burden of proving factors (1), (2) and (3) upon the employer to sustain a finding of independent contractor status, Colorado leaves the question of burden open. "[A] general rule of statutory construction [is] that the burden of proving justification or exemption under a special exception to the prohibitions of a statute generally rests on one who claims its benefits." EnergySolutions, LLC v. Utah, 625 F.3d 1261, 1274 (10th Cir. 2010) (quoting NLRB. v. Ky. River Cmty. Care, Inc., 532 U.S. 706, 711 (2001)). This question of burden allocation has not, however, been decided in the context of the new CWCA. While California expressly weights factors (1), (2), and (3) equally, the text of C.R.S. § 8-4-101(5) could be said to mandate a finding for the hiring entity that proves both freedom from control (exercised and contractual) and the independent contractor's customary engagement in an independent business providing the service in question. Such a reading would render Colorado's "primary work" factor secondary.

It should be noted that, the attorney fee provision (discussed below) does not apply to claims by workers found to be independent contractors. C.R.S. § 8-4-110(1.5).

Employees who worked exclusively outside of Colorado cannot assert claims under the Wage Claim Act or the Minimum Wage Act. Abdulina v. Eberl's Temp. Servs., Inc., 79 F. Supp. 3d 1201 (D. Colo. 2015).

Employers' Obligations Upon Termination of Employment

Voluntary Separation by the Employee

Upon voluntary separation or resignation from employment by...