Colorado’s Department of Labor and Employment (the “CDLE”) released the 2023 Publication and Yearly Calculation of Adjusted Labor Compensation Order (the “PAY CALC Order”),[i] “increas[ing] the compensation thresholds applicable to a variety of Colorado wage-and-hour and workplace requirements.”[ii]  The PAY CALC Order establishes Colorado’s minimum wage and other pay levels that adjust periodically for private sector work that is not otherwise exempted under CDLE rules.[iii]

What Changed from Last Year’s PAY CALC Order?

The PAY CALC Order increased the yearly calculation of minimum pay level for each Colorado Overtime & Minimum Pay Standards (“COMPS”) order rule.  Full Colorado minimum wage increased $1.09 from 2022 to 2023, from $12.56 to $13.65 per hour, based on the Consumer Price Index.[iv]  For employers operating in Denver, the local minimum wage increased $1.42 from 2022 to 2023, for a new local minimum wage of $17.29 per hour.[v]  The amount employers must pay to tipped employees increased proportionally, from $9.54 to $10.63 per hour to the extent adding tips raises the total pay to full state minimum wage, $13.65 per hour.[vi]

CDLE rules allow employers to pay non-emancipated minors 15% below full minimum wage.  Thus, the minimum wage for this group increased from $10.68 to $11.61.[vii]  The minimum pay for agricultural range workers, based on a weekly minimum, is determined by the prior year’s level adjusted for inflation.  Based on the high inflationary period Americans are facing, minimum pay for agricultural range workers increased from $515.00 per week to $559.29 per week.[viii]

Employees in executive, supervisory, administrative, or professional roles (“EAP employees”), along with certain owners or proprietors of non-profit employers and decision-making managers, not only saw changes to their 2023 minimum wage calculation, but also to how future annual adjustments to their minimum wage will be calculated.  In 2022, this group had a minimum required wage of $865.38 per week, with an annual salary of $45,000, plus sufficient compensation to meet the minimum wage for all hours worked in a workweek.[ix]  In 2023, the minimum weekly wage for these workers increased to $961.54, rounded to an annual salary of $50,000.[x]  In 2024, this minimum weekly wage will increase to $1,057.69, rounded to an annual salary of $55,000, and in 2025, the calculation will be determined based on the prior year’s level adjusted by the Consumer Price Index.[xi]  These changes raise the salary threshold to qualify for exemption from overtime, meal break, and rest break requirements.[xii]

“Highly technical computer employees” are either afforded compensation in accord with EAP employees, discussed above, or $31.41 per hour, up from $28.92 per hour in 2022.[xiii]   Further, the salary threshold for “highly compensated employees” increased from $101,250 annually in 2022, to $112,500 in 2023, and the EAP salary weekly.[xiv]  This change is significant because, along with raising the threshold to exempt employees from meal break and rest break requirements, it also impacts noncompetition provisions.

Changes to Colorado law concerning restrictive covenants went into effect on August 10, 2022, effectuating the “most significant change to [Colorado’s] legal landscape concerning restrictive covenants in the employment context in the state’s history.”[xv]  Under the old law, “certain restrictive covenants, such as covenants not to compete or solicit customers,” were void unless they qualified for one or more of four exceptions.[xvi]  Under the new law, the only valid exceptions are for: “(1) the purchase and sale of a business or its assets, (2) the protection of a trade secret if the individual earns an amount equal to or greater than a highly compensated worker . . ., and (3) the recovery of training or scholarship expenses under certain conditions.”[xvii]  For the second exception to apply, the employee must meet the threshold of a highly compensated worker both “at the time the restrictive covenant is entered into and at the time it is enforced.”[xviii]  To be bound by a non-solicitation of customers provision, an employee “must make at least 60 percent of the highly compensated worker salary threshold ($67,500 in 2023)[.]”[xix]  Similarly, for non-compete provisions created on or after August 10, 2022 to be enforceable, employees bound by them must have annual salaries equal to or above $112,500.[xx]

Takeaway

As Americans have experienced increased costs of living and consistently soaring consumer prices over the last few years, the CDLE increased minimum pay standards for Colorado employees accordingly.  While the changes are straightforward, employers must ensure compliance with minimum wage requirements not only on the state level, but also on the local level for Denver-based employers.  Finally, employers who seek to enforce non-compete provisions and non-solicitation of customers provisions should be aware of changes to the required salary threshold to qualify as a “highly compensated employee.”

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Sources

[i] 7 C.C.R. § 1103-14.

[ii] Rebecca M. Lindell, Harrison J. Meyers, & Roger G. Trim, Colorado’s New Pay Standards Reflect the State’s Rising Cost of Living, XIII Nat. L. Rev. 19 (Jan. 19, 2023), https://www.natlawreview.com/article/colorado-s-new-pay-standards-reflect-state-s-rising-cost-living#:~:text=Colorado’s%202023%20minimum%20wage%20rate,a%20%241.09%20increase%20from%202022.

[iii] Colorado Dep’t of Labor and Emp., Div. of Labor Standards and Stats., Interpretive Notice & Formal Opinion (“INFO”) # 1: Colorado Overtime & Minimum Pay Standards Order (COMPS Order), (Dec. 2, 2022), https://cdle.colorado.gov/sites/cdle/files/INFO%20%231%20COMPS%20Order%20%2338%20%282023%29.pdf.

[iv] 7 C.C.R. § 1103-14:1.2(A).

[v] See Lindell et al., supra, note 2.

[vi] 7 C.C.R. § 1103-14:1.2(B).

[vii] 7 C.C.R. § 1103-14:1.2(C).

[viii] 7 C.C.R. § 1103-14:1.2(D).

[ix] 7 C.C.R. § 1103-14:1.2(E).

[x] Id.

[xi] Id.

[xii] See Lindell et al., supra, note 2.

[xiii] 7 C.C.R. § 1103-14:1.2(F).

[xiv] 7 C.C.R. § 1103-14:1.2(G).

[xv] Michael H. Bell, Harrison J. Meyers, & Robert G. Trim, Colorado Overhauls Noncompete Law to Limit Enforcement to High Wage Earners, Impose Penalties for Employer Violations, XII Nat. L. Rev. 136 (May 16, 2022), https://www.natlawreview.com/article/colorado-overhauls-noncompete-law-to-limit-enforcement-to-high-wage-earners-impose.

[xvi] Id.

[xvii] Id.

[xviii] See Lindell et al., supra, note 2.

[xix] Id.

[xx] Id.