With the beginning of 2026 comes a few changes in employment law. While the biggest change in Arizona and New Mexico is an increase to the minimum wage, in Colorado there are a few other changes besides the minimum wage. That is not to say there have not been changes during 2025, but that most have taken effect already or will in later years. We will mention those changes as well as new things for January 1, 2026.
Minimum wages
Arizona will increase their state minimum wage to $15.15 in 2026. Tipped employees will be $12.15 with a state-wide $3.00 tip credit. Local minimum wages, which must be followed if higher than the state wage, will be $18.35 in Flagstaff and $15.45 in Tucson. Be sure to update your employment law posters as well.
New Mexico’s minimum wage in 2026 will remain at $12.00 and Albuquerque’s local minimum wage will also remain at $12.00. However, Las Cruces will raise their minimum wage to $13.01. Santa Fe and Santa Fe County will adjust their minimum wage to inflation on March 1, 2026.
Utah, Wyoming, and Idaho do not have state minimum wages, and therefore are subject to the federal minimum wage of $7.25 per hour.
Colorado’s minimum wage is expected to increase to $15.16 in 2026 with a tip credit wage of $12.14. Local minimums will be $19.29 in Denver, $16.82 in the City of Boulder, $16.82 in unincorporated Boulder County, and $18.17 in Edgewater. Note that in November of 2025 the Boulder County Commissioners passed ordinance 2025-001 which adjusted the County minimum wage to match that of the City of Boulder.
The Colorado overtime exemption threshold rises to an expected $57,783.96 in 2026. In addition, the definition of a highly compensated employee is also expected to rise to $130,014.
However, these local wages could change later in 2026 as the Legislature passed HB25-1208 which takes effect January 1, 2026. Current law allows local government to establish local minimum wages greater than the statewide minimum wage. A local government that enacts a minimum wage must provide the tip offset for tipped employees described in the state constitution, which is $3.02. On and after January 1, 2026, a local government that has enacted a minimum wage ordinance that exceeds the state minimum wage may (but does not have to) increase the amount of the tip offset associated with the local minimum wage. However, tipped workers must still earn at least the state minimum wage minus $3.02. The City of Edgewater is scheduled to vote on expanding their tip offset in mid-December. Employers Council will keep our members informed should any of the local minimum wages change.
Due to the new state minimum wage, as well as updates to child labor and whistleblowing regulations, there will be a new Colorado Overtime and Minimum Pay Standards (COMPS) poster for 2026. As a reminder, by state statute a copy of the poster must be included in a handbook if an employer issues a handbook. We will have, when made available by the CDLE, image samples of the poster on our website that can be copied and pasted into documents.
Colorado FAMLI changes
Effective January 1, 2026, the FAMLI premium rate drops to 0.88% of wages. Employers and third-party payroll administrators need to adjust payroll deductions accordingly.
Beginning January 1, 2026, the IRS will require employers with 10 or more employees to cover their portion of Social Security and Medicare taxes (FICA) and federal unemployment taxes (FUTA) on certain FAMLI medical leave benefits. Read our article for more details.
Neonatal care leave will be available starting January 1, 2026. Parents of newborns receiving critical care in a hospital may be eligible for up to 12 additional weeks of FAMLI leave starting in January. Please note that private plans will need to be updated to reflect this addition.
We have updated our handbook policies and other FAMLI publications to reflect these new changes.
CO AI law in 2026
As Mark Decker explained in a previous article, when the Colorado AI Act was first passed, Governor Jared Polis signed it with the unusual caveat that the law would need to be amended before it went into effect in February 2026. Lawmakers anticipated that additional time would be necessary to refine definitions, clarify employer obligations, and address concerns from both the business community and consumer advocates. However, SB25B-004 officially delayed the Act’s effective date to June 30, 2026. The delay came after a special legislative session where lawmakers were unable to reach a consensus on substantive reforms. By extending the timeline, the legislature signaled that the details of how to balance innovation, fairness, and the purpose of the Act remain unsettled.
Tax Forms in 2026
The IRS issued guidance November 5th providing penalty relief for employers from the reporting requirements in President Donald Trump’s new tax law on tips and overtime found in the Big Beautiful Bill. Notice 2025-62 said that employers won’t face penalties for failing to provide separate accounting of tip amounts or occupations. This relief applies for tax year 2025. Forms W-2 and 1099 for tax year 2025 won’t be updated to account for the tax law changes.
For Colorado employers who use state tax forms, the Colorado Department of Revenue has updated the following wage withholding tax forms based on federal tax changes, including the new deduction for qualified overtime compensation.
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DR 0004, Colorado Employee Withholding Certificate. This form has increased amounts for the standard allowance. Worksheet 1 also has new lines to account for certain federal deductions that must be added back for Colorado tax, including the new overtime deduction. An existing employee may update their withholding certificate for 2026, but they are not required to.
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DR 1098, Colorado Withholding Worksheet for Employers. This worksheet has increased amounts for employers to use if an employee has not submitted form DR 0004. The instructions also state that employers should not adjust Colorado withholding outside of the prescribed calculation. Employees must use form DR 0004 if they want to account for federal deductions. Employers must begin using the updated calculation for pay periods beginning on or after January 1, 2026.
Also, a reminder that the language in the DR 0995, Notice of Federal and State Refundable Tax Credits. must be provided annually and directly to each employee by all Colorado employers, either electronically or in print. Sending a link to the notice or posting the notice in the workplace is not sufficient.
A Look back at 2025
In 2025 new restrictions on the use of biometric data in Colorado took effect. See our Whitepaper on the issue. The following new laws were passed and implemented:
HB25-1001 (Effective August 6, 2025) As explained in a previous article, this new law strengthens protections for alleged victims of wage theft.
HB25-1312 (Effective May 16, 2025) This new statute defines deadnaming and misgendering as discriminatory acts under the Colorado Anti-Discrimination Act (CADA) and prohibits them in places of public accommodation.
HB25-1031 (posting requirement effective January 1, 2026) The bill creates a civil cause of action for peace officers who make reports of alleged violations of laws or policy and the report is a contributing factor in an adverse employment action.
Looking Ahead: The Impact of 2025’s New Legislation
HB25-1284 -Beginning January 1, 2027, electrical and plumbing employers that employ an apprentice in Colorado will be prohibited from registering an apprentice with the employer's respective governing board, unless the apprentice is enrolled in an apprenticeship program training them for an occupation officially recognized by the federal Department of Labor (DOL).
HB25-1300-Taking effect January 1, 2028, this new law will require an employer (or the employer's insurer) to use the state’s utilization standards when responding to a request for authorization from a treating physician under workers’ compensation. Most impactful is the second consequence, which is the removal of the four-physician designation rule for workers’ compensation treatment.
While we continue adapting to the changes introduced in 2025, 2026 will bring new developments into focus. The legislatures open in January and more change is always on the horizon. At Employers Council we are dedicated to closely monitoring these developments, especially as regulatory responsibilities continue to transition from the federal level to the states. Should you have any questions or concerns, please contact us at info@employerscouncil.org.
Jacqueline Talbot is a paralegal with Employers Council