The Colorado Wage Claim Act (“CWCA” or the “Act”) already provides for robust penalties in the event an employer fails to timely pay wages or overtime to employees. However, beginning on January 1, 2023, these penalties will increase in severity and, concomitantly, employers’ potential defenses to wage claim penalties will be further limited.
CWCA Penalties, Currently
As of today, if an employee submits a written demand for payment of unpaid wages or overtime, and the employer fails to pay within 14 days, the employer will be liable for the unpaid wages and a penalty of either the greater of 1) up to 10 days of the employee’s average daily earnings, or 2) the unpaid amounts plus a) 125% of the unpaid amount, up to and including $7,500.00 in unpaid wages or overtime; b) 50% of the unpaid amount exceeding $7,500.[1] Both penalties increase by 50% if the employer’s failure to pay was “willful,” meaning that the failure to pay was intentional and without good cause.[2] To demonstrate, under the latter category of penalties:
· Unpaid Wages: $10,000.00
· Compensatory Damages: $10,000.00
· Penalty – 125% of Unpaid Wages up to $7,500: $9,375.00
· Penalty – 50% of Unpaid Wages in Excess of $7,500: $1,250.00
· Willful Penalty – 175% of Unpaid Wages up to $7,500: $13,125.00
· Willful Penalty – 100% of Unpaid Wages in Excess of $7,500: $2,500.00
· Total Liability for Non-Willful Violation: $20,625.00
· Total Liability for Willful violation: $25,625.00
CWCA Penalties After January 1, 2023
Starting January 1, 2023, the above penalty and attorney fee provisions will become even more employee friendly. Regarding penalties, an employer who fails to pay unpaid wages or overtime within 14 days of either a written demand from the employee or service of an administrative claim or a civil action, will be liable for the unpaid wages/overtime, plus either double the unpaid amount or $1,000.00, whichever is greater.[3] For “willful” violations, the penalty increases to either triple the unpaid amount, or $3,000.00, whichever is greater. Under the revised statutes, these penalties are automatic. Additionally, the new version of the statute permits an employee to make a written demand for payment, or file an administrative complaint or civil lawsuit, on behalf of himself and any similarly situated employees. To demonstrate, using the same unpaid amounts as above:
· Unpaid Wages: $10,000.00
· Compensatory Damages: $10,000.00
· Penalty - Double the Unpaid Wages: $20,000.00
· Willful Penalty - Triple the Unpaid Wages: $30,000.00
· Total Liability for Non-Willful Violation: $30,000.00
· Total Liability for Willful Violation: $40,000.00
Employer Defenses to Penalties
On and after January 1, 2023, an employer can only avoid penalties if it tenders the full amount of unpaid wages/overtime demanded by the employee “in good faith” within 14 days of the employee’s written demand, and the employee fails to recover a sum greater than what the employer tendered. This becomes problematic if the employee’s “good faith” demand far exceeds what the employer believes is owed. There is no definition of “good faith” and, until either the courts or the Colorado legislature provides a definition, employers may either: 1) pay the amount the employee demands, or 2) pay the amount it believes is owed the employee and, if the employee recovers more than the employer paid, but not the amount demanded, argue that no penalties should be applied because the employee did not make a “good faith” demand.
Key Takeaways
Given that the CWCA will permit the potential recovery of quadruple damages for willful violations of the Act, plus attorneys’ fees and any other liquidated damages available under federal law, employers should audit their payroll practices to ensure full compliance with wage and overtime laws; determine what amount is actually due the employee if a written demand is made; and, make a business decision about whether they will pay the demanded amount or the amount that is actually owed and argue that no penalties should be applied because the employee failed to make a “good faith” demand. Campbell Litigation is available to assist employers in compliance with the CWCA.
[1] Colo. Rev. Stat. § 8-4-109(3)(b).
[2] Colo. Rev. Stat. §§ 8-4-109(3)(c).
[3]This new language regarding service of an administrative claim or civil action essentially removes the previous requirement for employees to first submit a written demand for payment to an employer, wait 14 days, and then move forward with an administrative claim or a private cause of action. In other words, employees will be free to file suit for unpaid wages or overtime immediately.