In recent years there has been a flurry of new laws regulating Colorado workplaces, large and small. This summary covers recent laws relating to:
- Paid leave
- Termination notice requirements
- Non-competition agreements
- Pay transparency
- PAID LEAVE REQUIREMENTS
Effective January 1, 2021, the Colorado Healthy Families and Workplaces Act (“HFWA”) requires Colorado employers to provide two types of paid sick leave to employees: (1) public health emergency (“PHE”) leave, and (2) accrued paid sick leave.
Paid leave in a PTO policy, or a collective bargaining agreement, can satisfy HFWA requirements, if it covers all the same conditions or needs and imposes no stricter requirements than the HFWA.
Public Health Emergency Leave (Still in Effect)
- Employers in Colorado must provide employees with up to two weeks of paid leave (80 hours if full-time, less if part-time) for COVID-related needs. The current 80-hour requirement took effect on January 1, 2021, and remains in effect.
- If an employee used all PHE hours in 2021, no new grant of PHE hours is required. But if an employee used only some of her available PHE hours, or if she was newly hired in 2022, the 80 hours must be provided.
- PHE leave is usable for a range of COVID-related needs, not just for confirmed cases. COVID-related needs include: illness with COVID symptoms, quarantining or isolating due to COVID exposure, COVID testing, vaccination and side effects, inability to work due to health conditions that may increase susceptibility or risk of COVID, COVID-related needs of family (illness, school closure, etc.). Employers cannot require documentation from employees to show that leave is for COVID-related needs.
- The PHE leave requirement remains ongoing until four weeks after a federal or a state public health emergency ends. Currently, both federal and state emergency declarations remain active. Based on those declarations, the requirement to provide COVID-related PHE leave will be in effect through at least four weeks after November 10, 2022.
Accrued Paid Sick Leave
- Employers in Colorado are required to provide one hour of paid leave per 30 hours worked, up to 48 hours per year. This requirement is permanently in effect, not just during the COVID emergency. Starting January 1, 2022, small and large employers have the same accrued leave responsibilities. In 2021, employers with 15 or fewer employees had to provide PHE leave, but were exempt from accrued paid sick leave.
- An employee begins accruing paid sick leave when the employee’s employment begins. The leave may be used as it is accrued. An employer must permit up to 48 hours of accrued paid sick leave to carry over from year to year, and an employer also may cap accrual at 48 hours per year. As a practical matter, this means that an employer may implement a policy that allows for accrual of up to 48 hours of paid sick leave. Once an employee accrues to the cap, no further accrual is required. But once the employee uses some of the accrued paid sick leave, accrual must again begin at the one-hour-per-30-hours-worked rate.
- Accrued leave is usable for a wide range of health and safety needs. Such needs include: (1) any mental or physical illness, injury, or health condition that prevents work; (2) diagnosis, care, or treatment of such conditions; (3) preventive care (including vaccination); (4) needs due to suffering domestic violence, sexual abuse, or criminal harassment; or caring for family with such conditions or needs.
- Employers can require documentation for accrued paid sick leave, but only for absences of four or more consecutive days, and employees can provide the documentation after the leave ends.
- Unused paid sick leave need not be paid out at termination. But any such unused leave time must be reinstituted if the employee is rehired within six months of termination. The paid sick leave also carries over to any successor employer.
- TERMINATION NOTICE REQUIREMENTS
Colorado employers have traditionally been required to provide terminating employees with a statement regarding the availability of unemployment benefits and certain information regarding unemployment claim filing. Effective May 25, 2022, Colorado employers are required to provide terminating employees, “at the time of separation,” with additional information in writing designed to assist them with unemployment claim filing. This information includes:
- Employer’s name and address
- Employee’s name and address
- Employee’s ID number of the last four digits of SSN
- The employee’s start date, last day worked, year-to-date earnings, and wages in final week of work
- The “reason” for separation
How specific must the “reason” for termination be? For employers, the most sensitive of these requirements is the obligation to state the “reason” for separation. This could not only affect eligibility for unemployment benefits—which appears to be the intended purpose of the requirement—but could also be used as evidence in any subsequent dispute over the termination itself. The statute itself provides no guidance as to how specific an employer must be when fulfilling this requirement, but the Colorado Department of Labor recently released a template separation notice that requires the employer to indicate whether the termination was because of a “Quit,” “Layoff,” “Discharge,” or “Other,” and then, for Quits and Discharges, provide a one-sentence supporting reason.
- NEW NON-COMPETE REQUIREMENTS
Effective August 10, 2022, Colorado tightened the requirements for the enforcement of non-compete agreements. See Colo. Rev. Stat. 8-2-113. These new requirements include the following:
The agreement must protect trade secrets. The non-compete must be for the protection of trade secrets and no broader than reasonably necessary to protect those secrets. The new requirements do not apply to straight confidentiality agreements or non-competes entered in connection with the sale of a business or business assets.
Non-competes may be imposed only on “highly compensated” employees. Non-competes may be imposed only employees whose “annualized cash compensation” meets certain escalating thresholds. The thresholds must be satisfied at the time the parties entered into the non-compete and at the time it is enforced.
Currently, the compensation thresholds for the next three years are:
- $101,250 in 2022
- $112,500 in 2023
- $123,750 in 2024
These thresholds mean, for example, that an employee who enters a non-compete agreement in 2022 must earn at least $101,250 in annual compensation at the time of the agreement and at the time the agreement is enforced, regardless of the date on which it is enforced. The threshold amounts may be pro-rated if the employee does not work a full year, based on the amount the worker “would reasonably expect to earn” during a calendar year of employment.
It is not clear how compensation is to be calculated. The statute defines “annualized cash compensation” to mean “the gross salary or wage amount, the fee amount, or the other compensation amount for the full year.” Our best read of this language is that employers may count base salary and any other guaranteed nondiscretionary compensation paid over the course of the year, but it is possible that even non-guaranteed cash compensation could count.
Customer non-solicitation provisions are considered non-competes but are subject to a lesser compensation threshold. Customer non-solicitation agreements may be imposed on employees who earn, at the time of the agreement and when it is enforced, at least 60% of the then-applicable “highly compensated” threshold. Like traditional non-competes, customer non-solicitation agreement must be no broader than reasonably necessary to protect trade secrets. The statute does not appear to touch existing case law holding that employee non-recruitment covenants are not subject to the statute.
There are new mandatory notice requirements. Applicants and employees must receive advance notice of any agreement containing a non-compete. Failure to comply will void the non-compete. The requirements are as follows:
- The notice must be given to:
- prospective workers prior to accepting an offer of employment; or
- existing workers at least 14 days before the earlier of the effective date of the non-compete or the date of additional compensation or change to the terms of employment that form the consideration for the non-compete
- Must be in a writing separate from any other covenants between the employer and worker
- Must be in clear and conspicuous terms
- Must be signed by the worker
- Must be provided with a copy of the agreement containing the non-compete
- Must identify the agreement by name and:
- state that the agreement contains a covenant not to compete that could restrict the worker’s options for subsequent employment; and
- direct the worker to the specific sections of the agreement that contain the covenant not to compete
The statute contains mandatory choice-of-law and venue provisions. Non-competes applicable to workers who “primarily reside or work” in Colorado at the time of termination of employment may not mandate venue outside of Colorado. Further, notwithstanding any contrary contractual provision, Colorado law governs non-competes applicable to workers who “primarily reside and work” in Colorado at the time of termination of employment.
Multiple forms of relief and penalties are triggered by making, presenting to a worker or prospective worker, or attempting to enforce a non-compete prohibited by the law, including injunctive relief, declaratory relief, actual damages, attorneys’ fees and costs, and a penalty of $5,000 per worker harmed by the violation.
The statute has no retroactive effect. The statute applies to non-competes entered or renewed on or after August 10, 2022. Non-competes formed prior to that date remain subject to broader statutory requirements that generally permitted non-competes designed to protect trade secrets or that are applicable to executive and management-level employees and their professional staff.
- PAY TRANSPARENCY
The Colorado Equal Pay for Equal Work Act (the “Act”) went into effect on January 1, 2021 and applies to any entity that employs at least one Colorado employee.
The Act imposes the following obligations on Colorado employers:
- Keep records of job descriptions and wage rate history for each Colorado employee for the duration of employment plus two years.
- No gender-based pay differentials for substantially similar work absent legally justified reasons.
- Do not restrict employees from discussing their compensation with other employees.
- Do not ask asking about or rely on an applicant’s salary history.
- Do not retaliate against applicants who refuse to disclose their salary history.
Covered employers must also include the following in all job postings for jobs, with some limited exceptions, performed in Colorado or that may be performed in Colorado: (i) the rate of compensation (or a range therof), (ii) a general description of any bonuses, commissions or other compensation, and (iii) a general description of all major benefits the employer is offering, like health care, retirement benefits, paid time off, and any tax-reportable benefits.
Employers must also make reasonable efforts to give notice of “promotional opportunities” to all Colorado employees on the same day and before making a promotion decision. The required announcement applies to all promotional opportunities, whether the job is in or outside Colorado, and must include the job title, how an employee applies for the job and, unless the job is entirely outside of Colorado, compensation and benefits information.
Fines for violations range from $500 to $10,000. To date, only three employers have been fined for pay transparency violations under the Act.
Key aspects of the law were addressed in Interpretative Guidance (the “Guidance”) in July 2021. The Guidance, denoted Formal Opinion #9, is not binding, but is instructive on some thorny issues:
- Job postings for entirely remote jobs, which could theoretically be performed in Colorado, must include compensation and benefits information, even if the job posting “states that the employer will not accept Colorado applicants.”
- Colorado employers may hire without job postings, except as needed to announce promotional opportunities to existing Colorado employees.
- The wage and benefit disclosure requirements do not apply to general “help wanted” signs.
- The salary range must contain a minimum and maximum amount, and statements like “$40,000 and up” or “up to $40,000” are not compliant.
The Bottom Line
As the Colorado legislature becomes increasingly active in its regulation of Colorado workplaces, employers with operations in Colorado should keep an eye on these and future developments.