As a business owner and operator, keeping up with employment updates in your state is crucial to ensuring you are compliant with the law. Below, we’ve outlined the important legal updates that businesses operating in the state of Colorado need to be aware of in 2020.
Colorado 2020 Updates to Wages & Hourly Salary Laws
State Minimum Wage Increase: Minimum wage increases are taking place in various states across the nation. For Colorado employers specifically, effective January 1st, 2020, minimum wage has increased to $12/hour from the prior $11.10/hour. Tipped employee minimum wage has also increased in Colorado to $8.98/hour from $8.08/hour. For Denver employees specifically, local minimum wage has increased to $12.85/per hour. Annual wage adjustments are based on the Consumer Price Index each year thereafter.
Summary of Colorado Minimum Wage Changes:
- 2020 Statewide minimum wage: $12/hour.
- 2020 Statewide minimum wage for tipped employees: $8.98/hour.
- 2020 Denver minimum wage: $12.85/hour.
FLSA Salary Test Update – Exempt Employees: The Colorado Division of Labor Standards and Statistics has revised the state’s minimum wage order, for the first time since the 1990’s. Effective January 1st, 2020, applicable to all employers in the state of Colorado that employ individuals based on a salary rate, the minimum salary to meet the salary test for exemption is now $684 per week or $35,568 annually (up from $455 per week or $23,660 annually). Meanwhile, the highly compensated employee salary test is now $107,432 annually, increased from $100,000 annually. To ensure your compliance, audit exempt employees to determine if they meet the salary test and reclassify employees or provide increases as needed. It is important to note that, for all private employers in Colorado, the changes to the exempt employee salary thresholds in COMPS Order #36, described below, supersede the salary thresholds outlined by the FLSA Salary Test update.
Summary of Colorado Salary Exemption Changes:
- 2020 Exempt employee minimum salary: $35,568/year.
- 2020 Highly compensated salary: $107,452/year.
- Note: COMPS Order #36, below, supersedes these requirements for all private employers.
COMPS Order #36: COMPS Order #36, issued by the Colorado Department of Labor and Employment, includes significant changes to Colorado law regarding minimum pay and overtime for private employers. Previously, Colorado’s wage order only covered four industries broadly, and meant that employees doing the same type of work for one industry might be paid less than those doing the same work for another company. Effective March 16th, 2020, this new order will replace Wage Order #35. This order’s most substantial change, going into effect on July 1, 2020, is an increase in salary thresholds for exempt employees, which are considerably higher than those provided by Federal Law. New salary minimums beginning on July 1, 2020, will be $35,568 per year. A schedule of increasingly higher salary thresholds will be implemented each year until the year 2025, at which time the salary threshold will change in accordance with the Consumer Price Index along with the minimum wage. COMPS Order #36 presumptively includes all industries and employees, unless specially exempted. To ensure your compliance, audit exempt employees to determine if they meet the salary test and reclassify employees or provide increases as needed, and review COMPS Order 36 to determine if any of the exceptions apply to your organization.
Summary of COMPS Order #36 Changes:
- 2020 Exempt employee salary threshold beginning July 1: $35,568 per year.
- Exempt employee threshold increases each year through 2024 and then adjusted according to the CPI annually starting in 2025.
Colorado 2020 Updates to Benefits Laws
FSA Contribution Cap Increase: Effective January 1st, 2020, employees can now contribute up to $2,750 to their healthcare Flexible Spending Accounts, increasing the annual cap by $50 from the previous $2,700. While this may have come too late for the 2020 open enrollment period, update your open enrollment materials and notify employees of this change now to ensure you are in compliance. Additionally, companies should prepare notices to accompany new employee packets and to pass out during the next open enrollment. This ensures employees are aware of the change when they’re choosing how much to contribute to their 2021 FSA.
Summary of Colorado FSA Contribution Cap:
- In 2020, employees can contribute $2,750 to FSA accounts.
401(k) Contribution Cap Increase: Effective January 1st, 2020, the IRS announced employees participating in 401(k) plans can contribute up to $19,500 (an increase of $500 from the 2019 limit). Limits on catch-up contributions for employees over 50 increased to $6,500, while the limit on contributions to Simple retirement accounts increased to $13,500. The limit on annual contributions to an IRA remains unchanged, at $6,000. To ensure you are compliant, update your open enrollment materials with the new contribution limits and notify all employees of this change.
Summary of Colorado 401(k) Contribution Cap Changes:
- 401(k) annual limit: $19,500.
- Catch-up contribution limit: $6,500.
- Simple retirement contribution limit: 13,500.
- IRA contribution limit: $6,000 (unchanged from 2019).
FML State Insurance Program: The Family Medical Leave Act entitles eligible employees who work for covered employers to take unpaid, job-protected leave in a defined 12-month period for specified family and medical reasons. Under the FMLA, eligible employees are entitled up to 480 hours of Family Medical Leave (FML). In Colorado, a bill has been introduced to create a state family and medical leave insurance program, which would require employers to pay a special tax to fund the program. While no implementation date has been set, keep an eye on this bill to ensure your compliance if it goes into effect.
Living Organ Donation – Tax Credit: Colorado has passed a law that creates a state tax credit for employers who voluntarily provide a paid leave of absence for an employee to serve as an organ donor. The tax credit is limited to leaves of absence of up to 10 working days, or the hourly equivalent of 10 working days. An employer may claim as the tax credit 35% of: (1) the amounts the employer pays to the employee during the leave of absence; and (2) costs incurred by the employer, if any, for temporary replacement help during the employee’s leave. To ensure you are compliant, update your organ donation policies and consult your company’s tax advisor.
Colorado 2020 Updates to Hiring Laws
Ban the Box: In an effort to prevent persons with criminal records from automatically being disqualified from employment opportunities, Colorado has enacted the ‘Ban the Box’ legislation. The legislation disallows job ads that use language such as ‘applicants with a criminal history need not apply.’ This legislation also disallows employers from requesting applicants to disclose prior felony convictions on job applications. Employers can still conduct background checks. However, it is crucial that any background checks are conducted at the appropriate stage of the hiring process. The Ban the Box legislation has been in place for employers with 11 or more employees since September 1st, 2019. However, beginning September 1st, 2021, this legislation will also apply to employers with 10 or fewer employees. To ensure you are compliant, update your recruiting and interviewing policies, and review and update the language of your job ads and applications.
Equal Pay for Equal Work Act: Starting January 1st, 2021, Colorado’s Equal Pay for Equal Work Act will prohibit all employers from discriminating based on sex (including gender identity), alone or in combination with another protected status, by paying less for substantially similar work in terms of skill, effort and responsibility. All employers with employees in the state of Colorado will be required to comply with this law. The law outlines that disparate pay among employees is allowable when pay is distributed in accordance with: seniority system, merit system, system measuring quality or quantity of output, location, education/training/experience, and travel (if necessary to the job). To ensure you are compliant, perform internal pay audits, update hiring practices and employment applications, update handbook policies, update recordkeeping and retention policies, and implement a schedule for regular pay audits.
Follow Big Fish Employer Services for all your national and statewide employment and HR updates. If you have questions about these compliance updates or any other HR laws, contact Big Fish Employer Services, your HR, Payroll & HCM Experts.