Staying Compliant with the Law When Employees Leave the Company

What Colorado Employers Need to Know About Changes to SB-161

By Elizabeth (Liz) Hartsel

A new Senate Bill 161, signed into law by Gov. Polis on June 3, 2022, changes the way employers must notify separated employees of wage deductions, the penalties for unpaid wage demands, and the handling of fees in civil or administrative actions regarding unpaid wage actions. These changes will apply to employers regardless of whether an employee’s separation is voluntary or involuntary.

Below we’ve outlined the fundamental changes employers need to be aware of.

Wage Deductions

Then: Employers were allowed to deduct money from employees’ wages or compensation if the employee failed to return money or property (i.e., a laptop, company car or other employer property) upon separation.

Now: Employers must provide notice of the anticipated deduction within ten calendar days after termination, including a written accounting of money/property owed, the replacement value of the property, the date the money or property was given to the employee, and the date that the money or property should have been returned. In addition, employers must reimburse any deductions within 14 days of the employee’s return of money/property if returned within 14 days of the employer’s notice.

Unpaid Wage Demands

Then: Employees could send wage demands if an employer refused to pay earned wages/compensation upon separation. Employers faced penalties if the employee did not receive full payment of their wage demand within 14 days.

Now:  Wage demands may be served on behalf of a “group of similarly situated employees,” and, effective Jan. 1, 2023, penalties will be automatically awarded if the employer does not make full payment within 14 days of wage demand OR service of administrative claim/civil action. Penalties will also be higher than they were under the previous law, equating to the greater of (a) 200% of unpaid wages, OR (b) $1,000. In the case of willful failure to pay (if the claim is the employer’s second failure to pay employees compensation of the same/similar type within the past five years), then the penalty will be the greater of (a) 300% of unpaid wages, OR (b) $3,000.

Fee Shifting in Administrative or Civil Actions

Then: The court could award the employer costs and fees if an employee (a) failed to recover a greater sum than the amount tendered by the employer and (b) claimed unpaid wages or compensation exceeding $7,500. The court could award the employee costs and fees if the employee recovered a sum greater than the amount tendered by the employee.

Now: The court may award employer costs and fees if the employer (a) makes full tender of amounts demanded in good faith within 14 days of demand, and (b) employees fail to recover a sum greater than the amount tendered. If the recovery exceeds the amount of tender in civil action, the court may award employee costs and fees. If recovery exceeds the amount of tender in administrative action, DLSS may award employee costs. The employee can also recover costs AND fees if recovery exceeds $5,000 in unpaid wages.

Do Now:

When employees leave the company, either voluntarily or involuntarily, and the employer has wage deductions, or the employee has unpaid wage demands, employers should consult with an employment attorney to ensure compliance with the new changes to SB-161. Doing so can go a long way toward solving problems before they start and help employers avoid the possibility of administrative or civil actions—and costly penalties.

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