5.31.19

The Legislature was busy this year, passing a variety of bills that will affect Colorado employers. House Bill 19-1267, entitled Penalties for Failure to Pay Wages, amends the Colorado Wage Act in ways that could be significant for all employers with operations in the state. The amendment, which was signed into law this month by Gov. Jared Polis (D), will take effect on January 1, 2020, and will apply to any offenses committed on or after that date.

The Legislative declaration accompanying the amendment says that the Legislature’s purpose is to provide more protection for victims of human trafficking because “[p]ersons who commit the crime of human trafficking often commit other crimes such as wage theft, tax evasion, and workers’ compensation fraud.”

But don’t be fooled into thinking that you are in the clear so long as you do not commit the heinous crime of human trafficking. The legislative findings specifically note that “not all victims of wage theft are victims of human trafficking.” The primary goal of the amendment is to “codify that labor is a thing of value subject to theft,” and therefore to incorporate Colorado’s Criminal Code into intentional, wrongful withholding of wages. The amendment also changes the definition of “employer” in a way that arguably creates individual civil liability for wage payment violations.

Wage theft

On the surface, the amendment seems to apply only to the criminal provisions of the Wage Act. The current version of the Wage Act provides that certain violations can be prosecuted as unclassified misdemeanors, including “willful refusal to pay wages, falsely denying the amount or validity of a wage claim with intent to underpay or to annoy, harass, oppress, hinder, delay, or defraud an employee, and intentional failure to pay minimum wage.” Intentional refusal to pay wages owed is currently punishable by a fine of up to $300, up to 30 days in prison, or both. Intentional failure to pay the minimum wage is punishable by a fine ranging from $100 to $500, or imprisonment ranging from 30 days to one year, or both.

The amendment removes the language describing the penalties for unclassified misdemeanors and inserts a reference to the crime of “theft,” which provides a more severe range of penalties. Depending on the amount of unpaid wages owed to the employee, “theft” can be as minor as a class 1 petty offense (less than $50) or as significant as a class 2 felony (more than $1 million). The latter is punishable by eight to 24 years in prison, and a fine that can range from $5,000 to $1 million. Even a class 1 petty offense is punishable by up to six months in prison and a fine of up to $500.

Thus, even the most insignificant “theft” crime under the amendment will carry a harsher penalty than the unclassified misdemeanors under the current version of the Wage Act. Moreover, a prosecutor can combine multiple instances of theft into an aggregated count, which can increase the penalty as the amount of unpaid wages increases. Presumably, an employer paying all of its employees under the same scheme could have the incidents aggregated for prosecution.

Individual liability for unpaid wages

The amendment also changes the definition of “employer,” which will affect all other components of the Wage Act, including the civil provisions.

In 2003, the Colorado Supreme Court ruled that officers and agents of a company were not personally liable for unpaid wages. In Leonard v. McMorris, the Court applied the definition of “employer” in Section 8-4-101(6) of the Wage Act and found that the Legislature did not intend to force officers and agents to act as sureties in the event that payroll was not met.

The new amendment specifically says that Leonard “does not provide sufficient protections for workers and their families.” Although it is not completely clear, it appears that the Legislature intends to overrule Leonard and that the case should no longer be relied upon as good law.

Under the amendment, Section 8-4-101(6) will state that the term “employer” has the same meaning as that set forth in the federal Fair Labor Standards Act. The FLSA defines “employer” as “any person acting directly or indirectly in the interest of an employer in relation to an employee[, including] a public agency, but [not] any labor organization (other than when acting as an employer) or anyone acting in the capacity of officer or agent of such labor organization.” Courts interpreting the FLSA have imposed personal liability on the basis of this definition. With the amendment’s adoption of the broad FLSA language, a Colorado court could hold individuals personally liable under the Colorado Wage Act.

Because the general definition of “employer” has been amended, the new definition can potentially be applied to all aspects of the Colorado Wage Act, including civil suits. Thus, all employers with operations in Colorado should be aware of the risk of personal liability related to claims for unpaid wages.

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