Guide to Colorado employee benefits and HR rules

Is your organization compliant with Colorado's employment laws?

If you have a Colorado-based company or employ Colorado workers, learning everything you need to know about HR compliance in Colorado is essential. This guide will provide a general overview of Colorado's employment and benefit regulations for small to medium size businesses.

Topics covered in this guide include:

• What are employment laws in Colorado?
• What are employees’ rights in Colorado?
• Required and non-required employee benefits in Colorado
• Health insurance coverage in Colorado
• Wage laws in Colorado

What are employment laws in Colorado?

The federal government sets minimum benefits and HR requirements for employers across the country. But many states create their own employment laws to offer additional employee protections—and Colorado is no exception.

Colorado has some of the country's most generous, employee-focused laws, making it a great place for individuals to work. Before opening or expanding your business in Colorado, you should familiarize yourself with state employment laws.

In Colorado, employers must follow several state-specific laws in addition to federal employment laws, such as:

• At-will employment
• Colorado is an “at-will” employment state, meaning employers and employees can end an employment agreement at any time, with or without cause. However, by law, employers can’t terminate an employee due to discrimination or other illegal factors.
• Employees who believe their employer fired them illegally can file a complaint.
• Colorado Chance to Compete Act (Ban the Box law)
• This law protects job seekers with criminal records from discrimination when applying for a position. All employers must allow individuals with criminal records to apply for open positions. They also can’t ask an applicant to disclose their criminal history.
• Equal Pay for Equal Work Act
• The Equal Pay for Equal Work Act standardizes certain job positions. Under the Act, all business owners must pay their employees the same wages if they have vastly similar tasks and responsibilities. Employers must offer the same benefits to these employees as well.
• Employers can vary pay due to location, job-related training and knowledge, tenure, merit, quantity or quality of work, and mandatory travel. Besides these six exceptions, employers must pay all employees performing similar work at the same rate.
• The second part of the Equal Pay for Equal Work Act prohibits employers from asking applicants about their previous salary history. Employers can’t use salary history to determine a salary for the applicant’s desired position. They also can’t discriminate or retaliate against job seekers for not disclosing their wage history.
• Colorado Anti-Discrimination Act (CADA)
• This Act prohibits employers of all sizes from discriminating against employees based on protected classes, such as race, color, national origin, disability, gender, sexual orientation, religion, age, and more. It also protects employees who report or help another employee suffering from unlawful discrimination.
• Colorado Youth Employment Opportunity Act (CYEOA)
• Minors aren’t permitted to work in certain industries or jobs that may be dangerous, such as mining, logging, operating power machinery, operating high-pressure or high-temperature boilers, etc. According to Colorado labor laws, a minor is anyone under 18, excluding those who have received their high school diploma or GED.
• Additionally, minors under 16 can only work a certain number of hours each day and amount of days during the week. They can also only work during certain times of the year. Minors aged 16-17 can work any time during the year, but can’t work more than eight hours per day or more than 40 hours per week.
• Colorado Employment Opportunity Act
• This Act prevents private and public employers from requesting or using a prospective employee’s credit history to make employment decisions. There’s an exception if the information is "substantially related" to the employee’s current or desired job or if the prospective employee or employer is exempt from the law.
• This law doesn’t apply to state or local law enforcement agencies, those that employ domestic servants or farm and ranch labor, or employers with less than four employees.
• Keep Jobs in Colorado Act
• The Keep Jobs in Colorado Act requires employers to use Colorado workers to perform at least 80% of the work on any public works project, such as those financed using some or all funds provided by the state, counties, school districts, or cities.
• Social Media and the Workplace Law
• This law prohibits private and public employers from gaining access to a job applicant’s or current employee’s personal social media accounts. This includes asking applicants and employees for their usernames or passwords, compelling an individual to add their employer to their social media contact lists, or requiring them to change their privacy settings.
• The Department of Corrections, county corrections departments, or any state or local law enforcement agency are exempt from this law.
• Colorado Labor Peace Act
• This act defines unfair labor practices to protect the public and employees. It provides guidelines regarding union agreements and collective bargaining units. Under this act, workers aren’t required to join a union (at most organizations) or pay dues even if they receive the same wages and benefits as union workers.
• Workplace Accommodations for Nursing Mothers
• Employers must provide nursing mothers breaks to express breast milk for up to two years after their child is born. They can provide unpaid breaks or allow employees to use their required rest and meal breaks.
• They also must make “reasonable efforts” to provide a private location, ideally close to the employee’s workspace, for them to comfortably complete their task. Bathrooms and toilet stalls don’t meet the private location requirement.

Now that we’ve reviewed a few Colorado-specific laws, we’ll review the state’s employee rights.

What are employees’ rights in Colorado?

Employees in Colorado have many rights under state and federal law. If you have or plan to hire employees in the state—regardless of your organization’s size— you must know your employees’ rights.

Some state rights include:

• Fair wages
• Employers must pay at least the state minimum wage and overtime pay.
• Meal periods
• For every five consecutive hours worked, employers must give their employees a 30-minute meal break. It can be an unpaid break if the employee stops working completely during their meal break. If you can’t provide a 30-minute period of uninterrupted time, the employee can eat their meal while working for the full 30 minutes without a reduction in pay.
• Rest periods
• All employees must receive a 10-minute rest period every four hours of work completed. Rest periods should ideally be in the middle of each four-hour period, and employees aren’t required to leave their workplace for the break.
• Discussion of wages
• Employers can’t prohibit their employees from speaking about how much they earn. They also can’t require their employees to sign waivers limiting their discussion around wage information and can’t retaliate against employees who discuss their wages with other employees.
• Access to personnel files
• Colorado employees have the right to access their personnel records to find information regarding their eligibility for employment, promotional opportunities, extra wages compensation, disciplinary measures, and termination.
• Current employees can access their records at least once per year, and previous employees can access their files once after their employment ends.
• Whistleblower protections
• Employees have the right to report someone they believe is committing a crime in the workplace. Employers may not retaliate against an employee with a penalty or termination if they report a crime.
• Occupational Safety and Health Administration (OSHA) compliance
• OSHA is a federal agency that outlines safety and health standards for all employees while they’re at work. Employers that aren’t following OSHA regulations can’t retaliate against employees that report them for violations.
• Consolidated Omnibus Budget Reconciliation Act (COBRA)
• Employees have the right to COBRA health coverage up to 18 months after employment ends. This extended coverage also applies to any dependents on the plan, such as the employee’s spouse or children under the age of 26.
• Smoke-free workplace
• Colorado employees have a right to work in a smoke-free workplace. Employers must also have restrictions in place on the distance from the building’s entrance individuals must be before they can safely smoke.

Health insurance coverage in Colorado

Employers aren’t required to offer health insurance in Colorado if they have fewer than 50 employees. But federal law requires employers with 50 or more full-time equivalent employees (FTEs) to provide insurance with minimum essential coverage (MEC) that satisfies the Affordable Care Act’s (ACA) employer mandate.

Even if you’re not required to provide health benefits, choosing to is a great way to attract and retain top talent. Traditional group health insurance remains a popular option for employers. But rising healthcare costs can make it challenging for small to medium size businesses on a budget to afford the premiums.

Small group health insurance premiums in some Colorado counties can get as high as $630 per month. In contrast, the average monthly premium for a 40-year-old on a silver individual health plan can be as low as $489. This makes covering the cost of individual health plans more accessible than offering a group plan in many parts of Colorado.

Employers interested in offering a health benefit can take advantage of Colorado’s lower individual plan prices by implementing an alternative health benefit, like a health reimbursement arrangement (HRA) or a health stipend.

Health reimbursement arrangement (HRA)

An HRA is an IRS-approved health benefit funded by the employer. It allows you to reimburse your employees, tax-free, for their individual health insurance premiums and qualifying medical expenses.

With an HRA, your employees choose the individual health insurance plan that suits their medical needs and budget. Employers save more money by not purchasing a group health insurance plan, not experiencing annual rate hikes, and only reimbursing their employees when they incur an approved healthcare expense.

Some HRAs, such as the individual coverage HRA (ICHRA), can satisfy the federal regulations for applicable large employers (ALEs), making an HRA a health benefit that can work for employers of all sizes.

Learn more about each HRA

Health and wellness stipends

With a health stipend, you can provide your employees with a set amount of money to help them pay for their medical expenses and insurance premiums. A health employee stipend isn't a formal group health plan, so you have complete control over which expenses are eligible for reimbursement.

You can offer as much stipend allowance as your budget allows, and employees can purchase the healthcare items that work for them and their families, making stipends a more flexible and personalizable option than group health insurance.

While stipends are taxable for employees, small businesses looking for a benefit that covers items other than medical expenses, like mental health counseling and gym memberships, can easily do so with a wellness stipend. Offering a health and wellness stipend together gives your employees greater coverage for their overall well-being.

Wage laws in Colorado

Wages in Colorado are subject to various state laws. We've compiled the most important requirements to know below.

Minimum wage laws

As of 2023, the federal minimum wage is $7.25 per hour. But Colorado has a state minimum wage requirement that exceeds the federal minimum wage.

Employers must pay their employees the minimum wage amount where they perform the work. All trainees, apprentices, and student employees must also receive at least the minimum wage rate.

Under the Fair Labor Standards Act, exempt employees in Colorado must receive a minimum salary of $50,000 in 2023. The amount will grow to $55,000 in 2024 and will continue to increase each year, adjusted by inflation.

Tipped wages

Employees who work for tips must earn enough in tipped wages to meet the Colorado (or City and County of Denver) minimum wage rate. For example, suppose a tipped worker in Denver makes $14.27 per hour and earns $2.50 in tips per hour. In that case, the employer must pay them the difference to meet the Denver standard minimum wage of $17.29 per hour.

If they make more than minimum wage in tips, the employer doesn’t need to pay anything extra. However, employers may not count more than $3.02 per hour in tips to offset the minimum wage for tipped employees.

Regular pay rate

An employee’s regular pay rate is all standard compensation that an employee receives.

Regular rate of pay examples include the following:

• Hourly rates
• Differences in pay resulting from shift changes
• Minimum wage tip adjustments
• Non-discretionary bonuses
• Production bonuses
• Commissions

Employers can exclude the following items from the regular rate of pay:

• Business expenses
• Bona fide gifts
• Discretionary bonuses
• Investment contributions
• Benefit pay (i.e., vacation, holiday, sick leave, or jury duty pay)

Show-up pay

Employers in Colorado aren’t required to pay employees “show-up pay,” which is the time an employee may show up for work but hasn’t begun working yet. Employees only receive payment for the actual time they’ve worked. Additionally, employers aren’t required to provide each employee with a certain amount of hours to work.

For instance, if a non-exempt employee shows up for their scheduled four-hour shift but only works two hours, the employer only has to pay the employee for the two hours they actually worked.

Overtime pay

The federal Fair Labor Standards Act says employers, in most cases, must pay an employee overtime in the amount of 1.5 times their regular pay for any hours they work over 40 in a standard workweek. But Colorado has slightly different regulations regarding overtime pay.

Colorado requires employees to pay 1.5 times an employee’s regular rate of pay when they work:

• More than 12 hours in a single workday
• 12 consecutive hours, regardless of their shift’s start and end time
• More than 40 hours in a single workweek

In addition to hourly employees, overtime may apply to salaried employees if they don’t meet the Colorado Overtime and Minimum Pay Standards Order #38 criteria. That’s why you should carefully review the overtime pay calculations to ensure you comply with Colorado law.

Vacation as wages

Colorado considers vacation pay the same as wages or compensation. As stated earlier, if an employer provides vacation time in their benefits package, they must pay the employee their earned but unused vacation time once they “separate” from the company.

In the case of a “bona fide furlough,” the employer doesn’t have to pay the employee for unused vacation time.

In Colorado, a "bona fide furlough" is:

1. caused by a full or partial shutdown of employer operations, and
2. planned and expected to last less than 30 days OR a longer duration caused by a state of emergency by the state or federal government.

If a furlough doesn’t meet both of the above requirements, the employer must pay out vacation time. If a situation begins as a bona fide furlough and then changes where it no longer qualifies, such as the employee getting permanently laid off, the employer must pay out the unused vacation time at that point.

Pay deductions

There are a few situations where employers can legally make deductions from an employee’s paycheck.

The following are allowable pay deductions under Colorado law:

• Deductions required by local, state, or federal law.
• This could include deductions for taxes, social security, FICA, Medicare, or any court-ordered deductions.
• Deductions detailed in written agreements between the employer and employee, such as a loan agreement, advances, services, equipment, or property.
• Deductions required to replace an item due to theft by an employee.
• Deductions for money or property the employee failed to pay or return to the employer.

Employers can’t make pay deductions for property damage or fines for negative employee behavior or actions.

Pay periods and notices

To ensure employees receive their paychecks promptly, the Colorado Wage Act requires employers to pay workers at least once per month or every 30 days, whichever is longer. Employees may not have a payday that occurs more than ten days after the pay period ends.

Payments made to employees enrolled in a profit-sharing plan, a pension plan, or similar programs are exempt from this pay period structure.

Employers and employees may set their own pay period structure if both agree on the terms. Outside these agreements, employers must follow the rules mention above. All employers must post a notice outlining the pay period structure and update the notice when any changes in the pay structure occur.

Pay statements

Colorado law requires employers to provide employees with an itemized pay statement at least once each month or with their regularly scheduled payment of wages.

Pay statements must include the following:

• Gross wages earned during the statement’s pay period
• All withholdings and deductions
• Net wages earned
• The inclusive dates of the pay period
• The name of the employee or the employee's social security number (SSN)
• The name and address of the employer

Employers may pay their employees wages via checks, cash, paycards, or direct deposit into the employee's account at the financial institution of their choosing.

Bonuses and commissions

The Colorado Wage Act considers non-discretionary bonuses and commissions as earned wages for labor or services carried out according to a set agreement between an employer and employee. Like regular wages, employees must immediately receive any unpaid bonuses and commissions when they terminate their employment.

Uniform pay

If an employer requires employees to wear a specific uniform, the employer must pay costs related to purchasing, maintaining, and cleaning the uniform.

The employer is exempt from paying for the uniform if:

• The clothing items the employer provides are plain, washable, and don’t need specific upkeep, like dry cleaning, steaming, etc.
• The clothing items are plain, washable, and aren’t provided by the employer unless they’re required to be a certain color, pattern, material, or contain a logo.

Regular costs of cleaning or replacing a uniform aren’t a permissible paycheck deduction. Additionally, as of 2020, employers can no longer request a “security deposit” upon hiring an employee to make them return the uniform upon termination.

Prevailing wages

Colorado law requires weekly payments of prevailing wages to laborers, mechanics, and employees working on public projects with contracts of $500,000 or more funded by an agency of the state government.

This law only applies to projects that don’t receive federal funding, aren’t covered by federal prevailing wage regulations, and aren’t granted by the state Department of Transportation.

Final pay

The final paycheck depends on how the employee leaves the company. If the employer terminates the employee, they must immediately pay all their remaining wages and compensation.

Exceptions to this include the following:

• If the accounting and payroll department is off shift, the terminated employee will receive their wages no later than six hours after the payroll team’s next regular workday begins.
• If the accounting and payroll department is off-site, the terminated employee will receive their wages no later than twenty-four hours after the payroll team’s next regular workday begins.
• If it’s a physical check, the employer must send the final paycheck to the work site, the employer's local office, or the employee's last-known mailing address.
• Mailing the final paycheck is acceptable if postmarked within the time frames outlined above.

If an employee quits voluntarily, they must receive their remaining wages on the next regular payday in the form of a check, cash, or by direct deposit. To ensure that employers pay final wages promptly, the Division of Labor Standards and Statistics considers an employee has quit if they don’t show up for their scheduled shift.

Suppose the employer needs to make a pay deduction for any money or property the employee failed to pay or return. In that case, the employer will have ten calendar days after employment is terminated to adjust the final payment amount properly before sending it to the employee.

Frequently asked questions