Tag Archive for: Colorado Supreme Court

Colorado Supreme Court upholds state paid leave program

In 2020 Colorado voter passed Proposition 118, which calls for the creation of a state agency that will (not unlike current workers compensation and unemployment agencies) provide paid family leave commencing January 1, 2023. In Chronos Builders, Inc. v. CDLE, a unanimous Colorado Supreme Court upheld Proposition 118, holding that the premium the new agency will charge to fund such benefits is not a tax in violation “of section (8)(a) of the Taxpayer’s Bill of Rights (‘TABOR’), which provides, as relevant here, that ‘[a]ny income tax law change . . . shall also require all taxable net income to be taxed at one rate, . . . with no added tax or surcharge.’ Colo. Const. art. X, § 20(8)(a).”

We conclude that the premium collected by the Division does not implicate section (8)(a) because the relevant provision of that section concerns changes to “income tax law.” The Act, a family and medical leave law, is not an income tax law or a change to such a law. Moreover, the premium collected pursuant to the Act is a fee used to fund specific services, rather than a tax or comparable surcharge collected to defray general government expenses. We therefore hold that the Act does not violate section (8)(a).

Colorado Supreme Court holds vacation is a wage due in final paycheck

As noted previously, litigation over vacation payouts has been on-going at the trial court level then the appellate courts, and now finally the Colorado Supreme Court. The issue has been whether, despite various statutory changes to Colorado’s wage laws, vacation is a “wage” that must be paid out in the employee’s final paycheck. More specifically the issue has been whether employers can lawfully rely on a policy that puts a condition on the payout of wages.

In the case before the courts, the employer wrote its policy to say that vacation would not be paid out at termination unless the employee (a) resigned (b) after providing a 2-week notice of resignation.  The trial court and Court of Appeals each held that the policy controlled. Colorado law does not require that employees be given any vacation, and employers are free to determine at what rate workers earn vacation.

However, the Colorado Supreme Court reversed. The Colorado Supreme Court held, first, that, once a worker had earned the vacation, in a known amount, it was both “earned” and “determinable,” which is all the statute in Colorado requires for it to be owed. Second, the Court pointed to another provision in the statute that prohibits waivers and forfeitures of vacation, once it has been earned, and held that the policy’s conditions were, therefore, unenforceable. In short, the Court held that the employee had “earned” the vacation, and it was “determinable;” therefore, it was owed, and any policy language attempting to forfeit it was unenforceable.

Particularly aggressive employers may point out that, in this particular case, the vacation policy said that vacation was “earned” once the necessary hours were worked to accrue it. They may argue that such language limits the reach of this decision, and that, if the policy had been written to say no vacation was “earned” until the necessary accrual-hours were worked and 2-week notice of resignation were given — such employers might argue — the policy would have been effective. Employers are advised to consult with experienced legal counsel before attempting to rely on such an aggressive reading of the case.

Source: Nieto v. Clark’s Market, Inc., 2021 CO 48 (6/14/2021).

Colorado Court of Appeals rules for employer on vacation issue

In a previous post, it was noted that a case has been pending before the Colorado Court of Appeals involving an employer’s refusal to pay vacation at separation, despite the provisions of CRS 8-4-101 and a new regulation promulgated by the CDLE thereunder. The Court of Appeals has now ruled in the case, Blount v. Colorado Department of Labor and Employment, that the employer was within its rights to refuse to pay out the vacation because it had clearly stated in its vacation policy that “Unused Vacation Allowances are not paid to Team Member at any time, including upon termination of employment.” The unpublished decision was not selected for official publication. It is also noted, as explained in this blog’s previous post, that this ruling is in apparent conflict and arguably contrary to the CDLE’s recent regulations and that the issue is currently pending before the Colorado Supreme Court in a different lawsuit.

Careful what you ask for, warns Colorado Supreme Court

The Colorado Supreme Court warned in a recent case that a party who seeks to enforce a settlement agreement — even by merely seeking a declaratory judgment and without actually asserting a breach of the settlement agreement — may make itself liable, if it fails in its action, for attorney fees under the settlement agreement’s fee-shifting clause, especially where that party itself had stated its intent to seek such fees had it been successful.

Having themselves sought attorney fees under that provision, plaintiffs tacitly acknowledged that their claims sought to enforce the Settlement Agreement’s terms. Having done so, plaintiffs cannot now take the opposite position, merely because their lack of success at trial rendered them liable for defendant’s attorney fees under the Settlement Agreement

Source: Klun v. Klun, 442 P.3d 88 (Colo. 6/3/2019).

Employers don’t face either-or decision when recovering for civil theft

A recent Colorado Supreme Court decision addressed what is known as the Economic Loss rule. Under the Economic Loss rule, a victim of wrongdoing who has a contract claim for the same wrongdoing is limited to recovering only the economic losses for breach of the contract.

In this case, an employee expected to be involved in a lawsuit with his employer. In order to prepare himself for the lawsuit, he emailed himself thousands of company emails to use as evidence. The problem was, the employer contends, that violated his employment agreement and constituted, among other things, theft from the company. When he eventually sued the company, the company counterclaimed for breach of the employment agreement, civil theft, and other claims. The employee cited the economic loss rule, saying that if what he did was wrong, then it constituted a violation of his employment agreement, and as such, his former employer was entitled to recover only the economic losses flowing from the breach of his employment agreement … not any of the other remedies available under its other claims, including statutory penalties and attorney fees.

The Colorado Supreme Court rejected the employee’s argument and held that the economic loss rule did not prohibit recovery especially under the Colorado civil theft statute. As the Court explained, the legislature had created the civil theft statute in order to impose enhanced penalties, which “strongly suggests that the section was intended to serve primarily a punitive, rather than a remedial purpose. ”

The case is a strong reminder to employees who are considering violating their employer’s rights by emailing themselves information. Employees cannot take it upon themselves to stockpile evidence in anticipated litigation. Likewise, the case is a reminder for employers who become the victims of such misconduct that they have strong legal rights of their own.

Source: Bermel v. BlueRadios, Inc., case no. 17SC246 (5/6/19).

Colorado Supreme Court holds referral service to be an employer, striking independent contractor classification

In contrast with the Trump Administration’s approach to so-called gig-economy cases, the Colorado Supreme Court recently struck one company’s attempt to classify its workers as independent contractors, not employees.

At the federal level, the Trump Administration has, through both the NLRB and DOL, recently held that (at least some) gig-economy companies, like Uber in particular, are technology companies that merely connect consumers with service providers (example, drivers), and as such, they may lawfully characterize — at least for federal purposes — those service provides as independent contractors.

In this case, the Colorado Supreme Court rejected a company’s argument that it was merely a referral source connecting consumers with housecleaners. The Court held the company was, therefore, liable for Colorado state unemployment taxes.

Does the case signal a rejection of the Trump Administration’s approach at the Colorado state level? Or is the case distinguishable from situations like Uber’s paradigm? These questions have yet to be litigated. It may simply be that the Colorado Supreme Court will reject, at the state level, at least for unemployment, if not also workers compensation, the Trump Administration’s approach at the federal NLRB and DOL level.

Alternatively, the case may suggest some key factual distinctions about the particular company in this case. In the Colorado Supreme Court case, the evidence — unlike arguably in other gig-economy cases — was that the referral company did quite a bit more than simply refer. The Supreme Court noted testimony that it assisted cleaners, it trained them, it exercised “quality control,” it even controlled the cleaners’ ability to hire assistants. The Supreme Court held that all of this combined to be “exactly the control and direction” sufficient to convert a company into an employer, in other words, independent contractors into employees.

Another distinction may have been the apparent lack of technology underlying the cleaning company’s business model. As the federal agencies have noted in their gig-economy cases, companies like Uber characterize themselves as, first and foremost, technology companies. They have invested in and run considerable technological platforms to effectuate their referral systems. It is those very technologies that created their business models. The federal agencies noted that running those technologies is, therefore, the business of a gig-economy company, like Uber. In other words, Uber’s real business is running that technology, not driving. Thuse the company and its service providers are, those agencies have said, in two different businesses.

One thing is clear, companies in Colorado that use independent contractors should immediately review those classifications with experienced legal counsel. This case reflects a continuingly narrow approach to independent contractor classifications at the state level.

Additionally, it should be noted that the Colorado Supreme Court did not note that this company had written agreements in place. Both Colorado state unemployment laws and workers compensation laws create a rebuttable presumption of independent contractor status if companies have written agreements that meet particular statutory requirements. In addition to reviewing their independent contractor classifications, companies should ensure they consult with legal counsel to develop compliant written independent contractor agreements, so they can at least assert the benefit of such a presumption in these cases.

Source: Colorado Custom Maid v. ICAO, case no. 17SC350 (Colo. 5/28/19).

Colorado Supreme Court holds statute of limitations on wage claims runs from pay period following its due date

The Colorado Supreme Court held that the statute of limitations under the Colorado’s Wage Claim Act, CRS. 8-4-101 to -123, begins to run from the pay period when the wage first becomes due and is unpaid.

The facts of the case illustrate the importance of this holding. Like many states, Colorado’s wage claim laws permit an employee to sue at the time of termination for any unpaid wages. Most commonly wage claims involve amounts that are claimed due in that final paycheck, for example, vacation pay, but what about wages that were claimed due in prior periods? This case involved a group of workers who sought wages “as far back as 1992.” Colorado’s wage laws, like federal law (Fair Labor Standards Act, FLSA), set a 2-year statute of limitations on wage claims, or 3 years if the violation is deemed wilful. The plaintiffs argued that the Act allowed them to seek all of their claimed wages, going back decades. In contrast, the company argued that they could seek only wages that came due in their final paycheck, nothing earlier.

The Colorado Supreme Court disagreed with both parties, holding that the plaintiffs can seek any wages that came due in their final paychecks plus any that came due in the 2 years preceding their termination (or 3 if the claim is deemed wilful), but that they cannot seek wages going back farther than that.

We conclude that under section 109, terminated employees may seek wages or compensation that had been earned in prior pay periods but remain unpaid at  termination. This right, however, is subject to the statute of limitations in section 122, which runs from the date when the wages first became due and payable—the payday following the pay period in which they were earned. A terminated employee is thus limited to claims for the two (or three) years immediately preceding termination.

It is noted that the Court there said plaintiffs could seek claims for 2 (or 3) years “immediately preceding termination;” however, it would seem from the language of the Act and the Court’s own reasoning that the Court meant “immediately preceding (the filing of their lawsuit seeking wages upon) termination.” That issue is likely to be litigated in future cases.

Source: Hernandez v. Ray Domenico Farms, Inc., case no. 17SZ77 (Colo. 3/5/18).

Dissenter rights include ability to terminate non-compete?

The Colorado Court of Appeals held that a shareholder’s statutory dissent rights, in at least the facts of the case before it, included the ability to terminate an existing non-compete. In this case, the plaintiff was a doctor at and a shareholder of a clinic. When his clinic merged with another, he disagreed and exercised his statutory right under C.R.S. 7-113-202 to dissent and demand payment for the fair market value of his shares. In addition, he contested the continuing viability of his then-existing non-compete.

In this case, the Colorado Court of Appeals held that he was entitled to be paid the fair market value of his shares but added that he was also relieved of his non-compete. To hold otherwise, the Court of Appeals said, would “further penalize Crocker’s exercise of his right to dissent, rather than protect him from the conduct of the majority” who had voted for the merger.

The decision drew a dissent as to the ruling relieving him of the non-compete. It remains to be seen whether the case will be heard by the Colorado Supreme Court.

In analyzing the case, the Court of Appeals noted a variety of facts, including the geographic radius of the non-compete versus the location of the plaintiff’s residence. It also remains to be seen whether this decision will be limited to its facts.

Source: Crocker v. Greater Colorado Anesthesia, P.C., case no. 2018COA33 (Colo.App. 3/8/18).