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On June 3, 2022, Governor Polis signed the Wage Theft Employee Misclassification Enforcement bill into law, amending the Colorado Wage Act. Some of the most significant changes to the law are set to take effect on January 1, 2023. As the new year approaches, employers should be aware of, among other items, the new notice requirement that employers must provide employees before making a deduction from their final pay and the increase in penalties that employers will face for not paying wages owed.

Final Pay Wage Deduction Notice Requirements 

Previously, Colorado law generally allowed employers to deduct from an employee’s final pay for the value of unreturned company property. Effective January 1, 2023, however, if an employer is going to make such a deduction from an employee’s final pay, the employer will need to provide notice to the employee of the payroll deduction for the amount of money or the value of property the employee failed to properly pay or return to the employer. The notice must include the following:

• A written account specifying the amount of money or the property the employee failed to pay or return.

• The replacement value of the property.

• To the extent known, when the money or property was provided to the employee.

• When the employer believes the employee should have paid the money or returned the property.

The notice must be provided to the employee within 10 days after termination of employment. Furthermore, employers should be aware that if the employee repays the money or returns the property within 14 days after receiving the employer’s notice, the employer has 14 days to pay back the amount that was deducted.

Increase in Penalties for Unpaid Wages

Also, effective January 1, 2023, employers that do not pay wages owed to an employee within 14 days after an employee makes a written demand or files an administrative claim or civil action will face an automatic penalty of the greater of two times the amount of the unpaid wages or compensation or $1,000. If the employee can show the violation was willful, the penalty the employer will face is the greater of three times the wages owed or $3,000.

Employers should continue to promptly conduct investigations into employee wage claims and respond to any employee who claims they are owed outstanding unpaid wages. 

Please reach out to Employers Council if you have additional questions regarding your organization’s responsibilities under the Colorado Wage Act and the upcoming changes taking effect next year. You can also learn more about the Act in our whitepaper.