Intro to Colorado Labor Laws

Colorado has passed a new law that increases penalties on employers for wage and hour violations under the Colorado Wage Act. The law now grants the Division of Labor Standards and Statistics the authority to publish the names of employers found to have willfully violated the law—for example, refusing to pay earned wages, misclassifying employees as independent contractors, or ignoring state wage orders after being warned. The law also increases penalties for misclassifying employees as independent contractors.  A willful violation now carries a $5,000 fine, which increases to $25,000 for a second violation within five years. The penalties can be waived if the employer pays all claimed wages within 14 days of an administrative claim.

Colorado recently passed a law that will expand employees’ choice of doctors under Workers' Compensation insurance starting in 2028. Under the new law, employers must notify employees that they can choose their own doctor from the list of level I or level II accredited physicians published by the Division of Workers' Compensation (DOWC). Employers should also update any workplace injury policies that currently require employees to use a doctor selected by the employer.

Colorado is next to join the everchanging landscape of limiting restrictive covenants for healthcare providers. Once enacted, this law will prevent employers from utilizing non-compete and customer non-solicitation agreements for certain healthcare workers. This prevents employers from using non-compete agreements (which restrict an employee's ability to work for a competitor after leaving) and customer non-solicitation agreements (which restrict an employee's ability to solicit former clients) for certain healthcare workers.  The law also refines existing exemptions for provisions tied to business sales. 

Employers with Colorado healthcare employees should review current employment agreements to ensure compliance before the August 6 effective date.

On May 16, 2025, HB25-1312 was signed into law expanding protections for transgender individuals by banning deadnaming and misgendering. Further, the law expands protections for when an individual makes a request to go by a chosen name in relation to any protected characteristic so long as the name is not offensive or is made for frivolous purposes. Employers should review their policies and practices to ensure they’re updated to reflect the updated protections.

Colorado recently updated their guidance on the reporting structure for the Colorado Family and Medical Leave Insurance (CO FAMLI) program for PEOs. The state has now issued a new ruling that reverses PEO reporting capabilities. Justworks PEO customers who are enrolled in CO FAMLI will be moved back to Client Reporting and their employee count will only include employees at an employer’s worksite. Under this new guidance, some small employers will no longer be liable for the employer portion of the tax, and as applicable, will have this tax removed from invoices moving forward. We will also process refunds for any applicable excess tax withholdings for impacted customers later this month. 

The Colorado Supreme Court recently ruled that holiday incentive pay must be factored into employees’ regular rate of pay for overtime calculation purposes. An employee’s regular rate of pay is determined based on their wages,  including but not limited to hourly rates, shift differentials – increased pay for working irregular or undesirable work hours, non-discretionary bonuses, and commissions. The Court determined that because holiday pay is given to employees for working undesirable shifts, it falls under the definition of a shift differential.  Colorado joins states like California in this trend. 

Employers should update their written holiday pay policies in accordance with the new law. For Justworks PEO customers, administrators must manually include holiday hours into overtime in Justworks, under Timecards > Edit > Calculate overtime. For Justworks Payroll customers, all pay rates will be taken into account when calculating overtime.