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Colorado Minimum Wage Order Update? Employers May Soon Be Paying More Overtime

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With changes in the federal minimum wage overtime pay threshold on the horizon, the Colorado Department of Labor and Employment is also considering whether to update the Colorado Minimum Wage Order. If labor advocates have their way, the state would raise the overtime exemption threshold to 2.5 times the state’s minimum wage, making nearly 400,000 additional full-time employees in Colorado eligible for overtime pay.

Currently, the state applies the minimum salary threshold of the federal Fair Labor Standards Act (FLSA), which is $23,660 for those who perform managerial, administrative, sales, or professional duties. This number was set in 2004 and hasn’t been adjusted since.

During the 1970s, 62 percent of American workers were eligible for overtime pay based on the FLSA’s overtime exemption amount, but even by the mid-2000s, just 15 percent of Colorado workers qualified, estimates the Bell Policy Center. As of last year, that percentage dropped by half, making only 80,000 workers eligible for overtime pay in the state.

At the federal level, both the Trump and Obama administrations have expressed the need to raise the amount. The Obama administration’s efforts fell short, however, when a federal judge struck down its proposed rule change in 2017. This adjustment would have doubled the overtime exemption amount to $47,000 and extended overtime protection to more than 4 million full-time workers.

In March, the U.S. Department of Labor announced a proposed rule that would raise the threshold to $35,308 annually; for “highly-compensated employees,” the threshold would rise from $100,000 to $147,414. These new figures are expected to take effect in January 2020 and are slated to give more than one million more American workers overtime protection.

If the federal provision does go into effect, Colorado would have to increase the minimum to at least match the federal threshold, but the state’s Division of Labor Standards and Statistics could decide to raise the minimum threshold even higher — and many labor advocates are encouraging the agency to do just that, as well as update the Minimum Wage Order to bring all industries under the provision’s coverage.

During a recent public hearing in Denver, residents spoke out in support of a higher threshold, which reinforces the positions of advocacy groups Towards Justice, the Bell Policy Center, and the National Employment Law Project. Their recommendation is that Colorado raise the threshold to 2.5 times the state’s minimum wage.

If that number holds up, that would put Colorado’s overtime exemption at $62,400, well above the federal level, and would make an additional 393,000 full-time Colorado workers eligible for overtime pay, estimates the Bell Policy Center. According to Joblist, Colorado workers currently put in the most underpaid overtime in the country with an average of $4,867 in lost wages annually.

Colorado isn’t the only state considering going above and beyond the FLSA’s overtime exemption amount. Washington has already made its threshold 2.5 times its minimum wage, which means that state’s overtime exemption will reach $80,000 by 2026. Trending in the same direction, Massachusetts threshold is set to be $68,744 by 2026.

The other main issue that labor advocates are asking Colorado lawmakers to reconsider is bringing more industries under the coverage of the Minimum Wage Order. As of now, the order applies to only four industries: commercial support service, food and beverage, health and medical, and retail and service. Supporters of an updated order argue that all industries should be included to provide protection for workers in additional industries such as agriculture and manufacturing.

While decisions are yet to be made regarding the state’s Minimum Wage Order, one thing is certain: Colorado employers must be aware of these potential changes in overtime pay provisions to prepare for the financial impact upon their businesses.

If you have questions about Zupkus & Angell’s employment law practice, please contact Muliha Khan at mkhan@zalaw.com.

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