Colorado has issued a new wage order titled, Colorado Overtime and Minimum Pay Standards Order #36. (“COMPS Order”). This Order replaces Colorado Minimum Wage Order #35 and is set to institute significant changes affecting minimum wage, wage deductions and credits, overtime compensation, and other important wage and hour issues. Unlike previous wage orders that only covered specific industries, the COMPS Order presumptively covers all employers (unless expressly exempted) and significantly expands employer obligations and liability. Click here to read our advisory.
The Colorado Department of Labor and Employment’s Division of Labor Standards and Statistics has released its proposed replacement for the annual Colorado Minimum Wage Order, and if adopted, it will bring significant changes to Colorado employers’ wage and hour obligations.
The proposed Order is called the Colorado Overtime & Minimum Pay Standards Order #36 (COMPS Order #36). The “#36” indicates that despite the name change, the proposed Order is the immediate successor to 2019’s Colorado Minimum Wage Order #35.
The most significant change in COMPS Order #36 is a massive expansion in coverage. Colorado’s minimum wage orders historically covered employers in only four industries: retail and service, commercial support service, food and beverage, and health and medical. COMPS Order #36 scraps the industry-specific system and implements presumptive coverage of all employers in all industries unless specifically exempted.
Along with the expanded coverage comes revised definitions of “employer” and “employee.” The COMPS Order adopts the federal Fair Labor Standards Act’s definition of “employer,” which includes “any person acting directly or indirectly in the interest of an employer in relation to an employee.” Without explicitly providing so, this new definition effectively creates individual liability for violations of COMPS Order #36, liability that has never existed under previous Wage Orders. The new definition of “employer” also includes foreign labor contractors and migratory field labor contractors and crew leaders. The new definition of “employee” includes anyone “performing a labor or service for the benefit of an employer” and looks to the degree of control the employer exercises and the extent to which the individual performs work that is the “primary work” of the employer in determining whether an individual is an employee or an independent contractor.
The COMPS Order #36 retains the familiar administrative, executive, professional, and outside sales exemptions but adds a minimum salary threshold to the duties tests. The minimum salary is higher than the current federal threshold of $35,568.00 per year. Beginning July 1, 2020, employees are “exempt” if they meet the criteria for one of the exemptions and make at least $817.31 per week or $42,500.00 per year. The salary threshold increases $3,000 every year until January 1, 2027, when the minimum salary will be indexed by the Consumer Price Index and the Colorado minimum wage. Companions and domestic workers employed by households are removed from the list of occupations exempt from the Order’s requirements. The Order adds an owners or proprietors exemption covering those who own at least a 20% equity interest in the employer and for the highest-ranked and highest-paid employees of a non-profit employer.
COMPS Order #36 also proposed the following changes or clarifications to existing wage and hour law:
- Rest periods, to the extent practical, must be provided in the middle of each four-hour work period, and an employee who is unable to take a 10-minute rest period is entitled to an additional 10 minutes’ pay.
- Similar to federal law, credits against the minimum wage for lodging may be taken only if the lodging is voluntary for the employee and primarily for the benefit of the employee.
- Employers who distribute policies or handbooks to employees must include a copy of the COMPS Order or the related poster with the distribution.
- Employers with non-English speaking employees must post a Spanish poster for Spanish-speaking employees and must contact the Division for a translated poster in any additional languages used in the workplace.
- An employer who neglects to post as required is ineligible for any employee-specific credits or exemptions.
The proposed Order also makes clear that the Division will accept and investigate complaints for violations of not only Colorado wage law, but also federal and local wage laws.
The proposed COMPS Order was released as part of the Division’s formal, statutory rulemaking process. The Division created the proposed order after a pre-rulemaking comment and testimony period that ended in August 2019. The Division will hold a public hearing on Monday, December 16, 2019. Public comments are due to the Division by December 31, 2019. The Division anticipates adopting the final rule on January 10, 2020. The new Order will go into effect March 1, 2020, with the exception of the phased-in exemption salary requirements.
We will be hosting an informational session soon to further describe the proposed changes, answer any questions, gather feedback to consider at the public hearing, and provide aid for drafting comments to be submitted before the December 31 deadline.
In its first significant decision applying the Supreme Court’s holding in Epic Systems v. NLRB, 584 U.S. ____, 138 S.Ct. 1612 (2018), the National Labor Relations Board (“NLRB” or “Board”) ruled that a restaurant owner lawfully compelled its employees to sign a revised mandatory arbitration agreement.
The employer, an operator of Latin-themed restaurants in the Houston area, required its employees to sign a revised arbitration agreement prohibiting them from opting into a class or collective wage and hour action. The employer issued the revised agreement because several employees had opted into such a wage action and the employer’s prior arbitration agreement only prohibited employees from filing class or collective actions.
The Board noted, in light of Epic Systems, that it was simply not unlawful under the National Labor Relations Act (“Act”) for an employer to require its employees to waive their right to file or opt into class or collective wage and hour actions. Accordingly, it was not unlawful for the restaurant owner to insist on its revised agreement as a condition of employment. Although it was clear that the employer imposed the new agreement in response to employees participating in the wage and hour action, the NLRB reasoned that the employer did not retaliate, because the new agreement did not actually restrict any activity protected by Section 7 of the Act.
Dissenting Board Member McFerran took issue primarily with this last point, noting that the NLRB has historically found that a facially valid work rule must be struck down if it is promulgated in response to “protected” (Section 7) activity. Member McFerran disagreed with the majority that this precedent only applied to rules that imposed restrictions on union or other protected activity. By suggesting that the Board’s decision “departs from Board precedent without explanation”, the dissent provided a recipe for the restaurant owner’s employees to appeal the decision.
By Joseph Hunt
Signed into law on May 16, 2019, by Governor Polis, Colorado employers will soon be at risk of a felony conviction and incarceration for “wage theft.” The new law is an express recognition of labor as a thing of value that can be subject to theft, if an employer willfully refuses to pay wages due. The new law increases the criminal penalty from a misdemeanor to a felony when the theft is greater than $2,000. It also removes the exemption from criminal prosecution for an employer that is unable to pay because of bankruptcy. The law goes into effect on January 1, 2020.
Supporters of the bill noted that increased criminal penalties may serve as additional deterrence for employers looking to skirt civil wage and hour requirements and help combat labor trafficking. The new law, however, will undoubtedly face challenges on the ground and in court.
As a practical matter, wage theft is very rarely prosecuted. The risk is that criminal law enforcement against employers can ensnare workers by crippling the businesses on which they rely for employment (not to mention the possibility of cutting off economic and punitive damages to which an employee would normally be entitled). The new law may be at odds with civil legislation like the Colorado Wage Act, which requires employers to make employees “whole” for unpaid wages. Moreover, it is unclear whether criminalizing the problem will increase encounters between police and unauthorized immigrants, subject to deportation, which the law is meant to protect. We will wait and see whether the wage theft law produces its intended result.
In the meantime, could we see employers asserting Fourth and Fifth Amendment challenges (against searches without a warrant and self-incrimination) to regulatory enforcement or civil procedure disclosures? It is possible. The threat of criminal penalties attaches constitutional protections, including Miranda rights, the right to a jury trial, and a higher standard of evidence required for conviction.
The Colorado wage theft law is another reminder for employers to take seriously their obligations under wage and hour laws. Review your pay practices, consult an attorney, and pay wages owed and on time, or else get used to jailbird orange.
By Bill Wright
The Department of Labor successfully stated a claim for record-keeping violations against a franchisor, because the franchisor failed to keep records on the hours worked by the specific individuals actually performing work under the franchise agreements. Using a franchise agreement, a janitorial company engaged corporations – and only corporations – to provide services to the company’s clients. The franchisees were typically one or two person operations, and the owners of the franchisees typically did the actual work themselves. The DOL sued the franchisor janitorial company, alleging that it failed to keep required records for those individuals who actually performed work for the company’s clients. At first, its use of franchise agreements protected the janitorial company; the case was dismissed by the trial court. But the Circuit Court reinstated the suit. The DOL’s allegations that the individuals performing the work were economically dependent on the janitorial company were enough to allege that those individuals were, by law, employees of the franchisor janitorial company, and therefore enough to allege the janitorial company was required to keep the FLSA records. Acosta v. Jani-King of Oklahoma, Inc., No. 17-6179 (10th Cir. Oct. 3, 2018)
Beware! An employer’s corporate structure – including even arguably proper use of independent contractors – might not protect you from record-keeping requirements. This suit will continue and might result in increased record-keeping requirements for all employers who use independent contractors. To be safe, you should know who is doing the work and the hours they keep.
By Chance Hill
On January 5, 2018, the U.S. Department of Labor (DOL) reissued 17 previously withdrawn opinion letters addressing a wide variety of topics under the Fair Labor Standards Act (FLSA). Such letters respond to specific questions submitted to the DOL’s Wage and Hour Division (WHD) and constitute an important form of guidance for employers and employees regarding the application of FLSA requirements and other laws to their workplaces. Employers may be able to use opinion letters for their affirmative defenses and receive deference by the courts if employers act “in conformity with” an opinion letter and in “good faith,” according to the Portal-to-Portal Act of 1947. The aforementioned 17 letters concerned inquiries ranging from questions about the exempt status of civilian helicopter pilots under Section 13(a)(1) of the FLSA to whether bonuses should be included in calculating employees’ regular rates pursuant to Section 7(e) of the FLSA.
The Obama Administration had withdrawn these opinion letters and discontinued the longstanding practice of issuing such letters while in office. (Instead, the Obama Administration issued a handful of documents that it referred to as “Administrator’s Interpretations.”) In his statement regarding these 17 opinion letters, the Trump Administration’s WHD Acting Administrator Bryan L. Jarrett reissued “the verbatim text” of each withdrawn opinion letter and asserted that it “is an official statement of WHD policy and an official ruling for the purposes of the Portal-to-Portal Act, 29 U.S.C. § 259.”
Wednesday a group of Chipotle employees brought suit in New Jersey federal court alleging FLSA violations stemming from Chipotle’s failure to follow the Obama-era salary-basis regulations. As you will recall, these regulations doubled the salary threshold for the so-called white collar exemptions, thereby rendering millions of workers eligible for overtime. But, you will also remember that a federal judge entered an order last year enjoining those regulations before they became effective, and that injunction was nation-wide (S&H Blog Post: Salary Threshold Change Stopped). So are these Chipotle employees just sore losers or did we just misunderstand the meaning of “injunction?” The plaintiffs in this case are arguing that, while a federal court did preliminarily enjoin the DOL from implementing and enforcing the salary-basis regs, the regs nonetheless became effective automatically under the Administrative Procedures Act because the court did not enter a permanent injunction. The plaintiff’s argument seems like a real long-shot, but it is yet another twist in the unbelievably circuitous route these regs have taken.
Wednesday the DOL announced that it was withdrawing two critical pieces of “guidance” issued under the Obama administration. The first piece addressed the DOL’s rather narrow view of who is an independent contractor (S&H Blog Post: DOL Says Employers Are Morons). The second piece established an extremely broad view of joint employment (S&H Blog Post: Joint Employment Wage/Hour). Taken together, the guidance pieces made it much harder for employers to navigate through the gig economy. The withdrawal of these guidance pieces obviously helps employers who use contractors or have potentially joint employer relationships. But the DOL did not suggest what enforcement strategy it may follow in the absence of these guidances, so the impact in real-world terms remains to be seen. Nonetheless, this provides some indication that our new Secretary of Labor is moving forward, at least in some respects, to reverse some of the prior administration’s approaches.
The District Court for the Northern District of California has weighed in on whether student athletes are “employees” under the law. On April 25, 2017, the Court dismissed a proposed class action brought by a former University of Southern California football player. The suit was against the NCAA and PAC-12 Conference for violations of the FLSA and California Labor Code.
In dismissing the claim, the Court relied in part on the Seventh Circuit’s 2016 decision holding former track and field student athletes were not employees. Here, the plaintiff argued college football is different from track and field because football brings in more revenue. No luck. Without addressing other policy implications, the Court declined to draw a line between revenue-generating and non-revenue-generating college sports. The Court also rejected the athlete’s comparison of college athletics to work-study programs, noting sports exist for the primary benefit of the students and not the school.
This is only the latest in the pay-for-play college athlete saga. Stand by.
Read the full decision: Dawson v. NCAA, et al., Case No. 16-cv-05487-RS (N.D. Cal. April 25, 2017).
Yesterday the Arizona Supreme Court issued a death knell to the pending legal challenge to Prop. 206. As you will recall from our blog post, last November our citizenry passed a referendum that raised the minimum wage and imposed mandatory paid leave on employers. The minimum wage hike took effect in January, while the paid leave provision becomes effective in July. The ensuing legal challenge to Prop. 206 found no traction, and met its demise yesterday when the Court unanimously rejected the appeal. Given the exigencies of the situation, the Court issued its ruling without a supporting opinion, but promised to publish an actual opinion when ready to do so. It appears that Prop. 206 is the law of the State, and only constitutional/political solutions remain. In the meantime, hello minimum wage hikes and paid leave.