Heather Fox Vickles and Jane Waterman-Joyce

The Colorado Department of Labor and Employment (“CDLE”) recently released Interpretive Notice & Formal Opinion (“INFO”) #17, addressing payment of commissions and bonuses. INFO #17 puts Colorado employers on notice that the CDLE interprets the Colorado Wage Act as prohibiting “present-to-win” clauses in bonus and commission agreements. A “present-to-win” clause requires an employee to be employed by the employer (or “present”) at the time of payout to receive the commission or bonus.

In the CDLE’s view, the employer must pay commissions or bonuses “so long as the employee did the required work, any agreed-upon and valid conditions for payment are met, and the wages can be calculated,” even if the employee has resigned or been discharged. In other words, employers cannot avoid paying commissions and bonuses on the basis that the employee is no longer employed as of the payout date if the employee has otherwise met the employer’s conditions for earning the bonus or commission.

INFO #17 provides one example of a clause the CDLE views as prohibited. An employer policy provides that an employee “must be an active Team Member at the time of payout” to receive bonuses. The employer then fires an employee the day before bonuses are due to be paid and does not pay the employee the bonus they otherwise would have received had they remained employed. In this scenario, the CDLE’s position is that the employer must pay the bonus because the employee met all criteria for earning the bonus except for being an active team member when bonuses were paid.

It remains to be seen whether the CDLE’s interpretation will be upheld by the courts if challenged by an employer with an express written policy stating that commissions or bonuses do not fully vest until the payout date.

Contact your Sherman & Howard attorney to explore this question further.