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Colorado unemployment agency continues trend of ruling in favor of workers who decline to return to work

A previous post addressed the requirement that workers return to work — or face loss of unemployment — when an offer to return (to comparable work) is extended, unless the worker is a “vulnerable individual” or otherwise unable to return due to coronavirus-related reasons. As noted there, the initial report was that the state was tending to find in favor of employees by a large margin. The Denver Business Journal is reporting today that the state unemployment agency is continuing that trend, now finding 84% of the time in favor of workers.

Colorado Department of Labor and Employment officials have received about 1,100 submissions from employers about workers who have refused to come back to work in recent weeks and want to keep receiving jobless benefits. And of the 869 cases that CDLE officials have adjudicated, only 16% have ended in workers being told to return to their positions or give up their unemployment payments, chief communications officer Cher Haavind said.

In the vast majority of cases, workers claiming they can’t safely return to work fall into one of two categories delineated by federal and state law as allowing them to refuse to go back to an environment where they would interact with many co-workers or customers, Haavind said. One is that they are part of a vulnerable population that would make them more susceptible to catching coronavirus — people over age 65 or who have underlying medical conditions such as heart troubles or being immunocompromised. The second is that they are caring either for someone who is at increased risk of contracting the virus or are caring for a child out of school.

Considering a voluntary internal audit to prepare for Colorado’s new equal pay law?

Last year I co-authored an article for the Colorado Lawyer about Colorado’s new equal pay law (the Colorado Equal Pay for Equal Work Act, “CEPEWA”), with two of CEPEWA’s drafters, Sarah Parady and Charlotte Sweeney. CEPEWA will take effect January 1, 2021. In our article, we noted that CEPEWA “CEPEWA does not grandfather current pay disparities” and further that “proof of intent to discriminate is not an element of a CEPEWA violation.” We recommended employers consider performing a voluntary internal audit to identify and eliminate any inadvertent pay disparities. Indeed CEPEWA recognizes a possible reduction of exposure if internal audits are done.

A new article was just published in the Colorado Lawyer discussing what such an audit might look like.

Source: Mind the Gap: Practical Solutions to Minimize Pay Equity Claims, by Christine Lyman, Lonnie Giamela, and LaLonnie Gray, The Colorado Lawyer, vol. 49 no. 5 (May 2020)

Colorado unemployment disputes skyrocket as employers begin to offer returns to work that employees decline, with CDLE at least initially tending to rule for workers

As previously posted on this blog, the Colorado Department of Labor and Employment Unemployment created a new portal for employers to use to report when an employee refuses after being offered to return to work; the refusal will generally render the individual ineligible for further unemployment, unless the individual can prove they are “vulnerable” and that the company has inadequate coronavirus protections in place.

The Denver Business Journal is reporting that approximately 150 workers have already advised the Colorado Department of Labor and Employment that they do not wish to return to work and would rather stay on unemployment due to concerns about coronavirus, while 200 employers have used the new portal to report refusals.

How is the CDLE handling these disputes? The Denver Business Journal advises the agency is attempting to investigate each claim individually, without agency representatives actually going to jobsites though.

Instead, workers will be asked to explain what underlying condition they have that makes it unsafe for them to return to work or why they feel the workplace is an unsafe environment, and employers will be asked if the worker is coming back at the same job and pay rate and if efforts have been made at increased sanitation and social distancing.

Who’s winning these disputes? For now the Denver Business Journal reports the CDLE is ruling generally in favor of the workers.

So far, CDLE officials, who have gone through about 55 claims, are coming down on the sides of the workers at a ratio of about 10-to-1, said Jeff Fitzgerald, unemployment insurance division director.

The CDLE does not explain in the article how it plans to address this issue going-forward especially if, as reported in the Denver Post, the combination of traditional unemployment benefits plus pandemic unemployment benefits is high enough that a “majority” of workers in Colorado are actually earning more money on unemployment currently than they would in their job if returned.

The cutoff point is around $30 an hour in Colorado, according to the study by Gregory Miller, a CFA and graduate researcher at CSU. Make more than that and the financial incentive is to return to work. Make less than that, and collecting unemployment pays better, especially if a job doesn’t come with health insurance and other benefits.

The combination of that “financial incentive” plus health concerns about the possible coronavirus-related implications of returning to work around others, even subject to Colorado’s social distancing guidelines, means the CDLE is going to be required to address many, many more such disputes going-forward.

Colorado Court of Appeals issues strong ruling on “horizontal veil piercing”

The Colorado Court of Appeals issued a strong decision involving “horizontal veil piercing.” The case involved a junior creditor suing his debtor and its senior creditor, alleging that the debtor and senior creditor were commonly owned. The debtor was owned in large part (81.25%) by the same five owners who owned 100% of a third company, which in turn owned 100% of the senior creditor. The junior creditor argued that the corporate veils between the entities should be pierced, that they were all “alter egos” of each other. The debtor argued that the senior creditor had been created solely for the purpose of holding the senior debt, which had subordinated his own claim.

Although the trial court had ruled in the plaintiff’s favor, the Colorado Court of Appeals reversed. The court held that the sister entities’ veils could only be pierced if the corporate veil between each of the entities and their respective owners were pierced. Here the court held that the plaintiff had failed to muster sufficient evidence to warrant piercing all of the corporate veils involved.

In so ruling the court re-affirmed that it is not sufficient to show common owners, and/or even common officers and directors. Commonality of owners, officers and directors is common in corporate structuring. Additionally it was not sufficient to show that the one entity had been (arguably) created for the purpose of holding the senior debt simply to keep the plaintiff subordinate; even if true, holding a note is a lawful purpose for which an entity may be formed.

Source: Dill v. Rembrandt Group, Inc., 2020 COA 69 (Colo.App. 4/16/2020).

BREAKING NEWS: Gov. Polis orders in-person Colorado workforce reduction of 50% – Denver Business Journal

The Governor’s order is not yet available, but the Denver Business Journal is reporting that “The order does not apply to critical, 24-hour businesses like health care, manufacturing, agriculture and public services such as trash collection and mail delivery.” In his press conference Governor Polis stated verbally the order will take effect Tuesday March 24, 2020 and that “If you can ensure no employees are closer from (sic, than) six feet from one another during the work day, you can continue.” The order will expire April 10, 2020 11:59 PM.

Source: www.bizjournals.com/

UPDATE 3-23-2020: The order is now available, as is a FAQ from the Governor’s office.

The order’s operative language, including an explanation of the possible exemption for employers that can certify 6′-distancing is, as follows:

The executive order directs all employers to implement tele-work options to the greatest extent possible. If tele-work is not practical or possible, employers are encouraged to stagger work schedules to reduce the proximity of employees during work hours and to keep employees on payroll. This Executive Order does not apply to any employer that can certify that employees are no closer than six feet from one another during any part of their work hours.

The FAQ provides further explanation as to the industries that are exempt from the order. Exempt industries include defense contractors, oil and gas production companies, construction companies, and a variety of other industries such as groceries, pharmacies, healthcare, law enforcement, etc. The FAQ also suggests that “Planes and any other form of travel should only be used for essential purposes.

Unemployment Insurance Worker FAQs | Colorado Department of Labor and Employment

Want a handy reference of Frequently Asked Questions (FAQs) related to Colorado’s Unemployment Insurance Program and availability of unemployment benefits as we go through this coronavirus experience? Check the state’s FAQ here: www.colorado.gov/pacific/cdle/unemployment-insurance-worker-faqs

Follow-up on new COMPS Order information from CDLE – 4 of 4

As previously discussed on this blog, the Colorado Division of Labor and Employment recently finalized its new wage order, titled COMPS Order 36. COMPS Order 36 has proven to be an overhaul of existing Colorado law, reaching many employers previously exempt from prior wage orders. The COMPS order has left many unanswered questions. In response this blog noted that the CDLE has just issued some additional information. AS explained in that post, employers should review the CDLE’s summary that it emailed out regarding its new information, which email is copy-pasted into that blog post.

As previously discussed on this blog, the Colorado Division of Labor and Employment recently finalized its new wage order, titled COMPS Order 36. COMPS Order 36 has proven to be an overhaul of existing Colorado law, reaching many employers previously exempt from prior wage orders. The COMPS order has left many unanswered questions. In response this blog noted that the CDLE has just issued some additional information. AS explained in that post, employers should review the CDLE’s summary that it emailed out regarding its new information, which email is copy-pasted into that blog post.

Employers curious how the CDLE will interpret the new order’s tip credit rules, including its continued use of the 80/20 rule that is being eliminated at the federal level but now being maintained at the Colorado state level, should review the CDLE’s Interpretive Notice & Formal Opinion (INFO) #3, which details the CDLE’s anticipated process for claims handling.

As a reminder, this blog recently noted an article by Bloomberg BNA surveying last year’s court decisions, which reflect an unwillingness by lower courts to accept even the federal government’s efforts to eliminate the 80/20 rule.

Follow-up on new COMPS Order information from CDLE – 3 of 4

As previously discussed on this blog, the Colorado Division of Labor and Employment recently finalized its new wage order, titled COMPS Order 36. COMPS Order 36 has proven to be an overhaul of existing Colorado law, reaching many employers previously exempt from prior wage orders. The COMPS order has left many unanswered questions. In response this blog noted that the CDLE has just issued some additional information. AS explained in that post, employers should review the CDLE’s summary that it emailed out regarding its new information, which email is copy-pasted into that blog post.

Employers curious how the CDLE will enforce wage claims should review the CDLE’s Interpretive Notice & Formal Opinion (INFO) #2, which details the CDLE’s anticipated process for claims handling.

Follow-up on new COMPS Order information from CDLE – 2 of 4

As previously discussed on this blog, the Colorado Division of Labor and Employment recently finalized its new wage order, titled COMPS Order 36. COMPS Order 36 has proven to be an overhaul of existing Colorado law, reaching many employers previously exempt from prior wage orders. The COMPS order has left many unanswered questions. In response this blog noted that the CDLE has just issued some additional information. As explained in that post, employers should review the CDLE’s summary that it emailed out regarding its new information, which email is copy-pasted into that blog post.

One item included in that email was a link to the CDLE’s own summary of COMPS Order 36. At “only” four pages, this summary is an easy to read introduction to this new law, which all employers should take time to review before the COMPS Order’s effective date of March 16, 2020. As employers do, they should also skim the CDLE’s poster, which is its own summary.

Follow-up on new COMPS Order information from CDLE – 1 of 4

As previously discussed on this blog, the Colorado Division of Labor and Employment recently finalized its new wage order, titled COMPS Order 36. COMPS Order 36 has proven to be an overhaul of existing Colorado law, reaching many employers previously exempt from prior wage orders. The COMPS order has left many unanswered questions. In response this blog noted that the CDLE has just issued some additional information. As explained in that post, employers should review the CDLE’s summary that it emailed out regarding its new information, which email is copy-pasted into that blog post.

One item included in that email is a link to the CDLE’s own summary of COMPS Order 36. At “only” four pages, this summary is an easy to read introduction to this new law, which all employers should take time to review before to note is that the CDLE has now provided its COMPS Order 36 poster, which is to be used in complying with Rule 7.4 of the new order. That Rule 7.4 provides, as follows:

7.4 Posting and Distribution Requirements.

7.4.1 Posting. Every employer subject to the COMPS Order must display a COMPS Order poster published by the Division in an area frequented by employees where it may be easily read during the work day. If the work site or other conditions make a physical posting impractical (including private residences employing only one worker, and certain entirely outdoor worksites lacking an indoor area), the employer shall provide a copy of the COMPS Order or poster to each employee within his or her first month of employment, and shall make it available to employees upon request. An employer that does not comply with the above requirements of this paragraph shall be ineligible for any employee-specific
credits, deductions, or exemptions in the COMPS Order, but shall remain eligible for employer- or industry-wide exemptions, such as exempting an entire employer or industry from any overtime or meal/rest period requirements in Rules 4-5.
7.4.2 Distribution. Every employer publishing or distributing to employees any handbook, manual, or written or posted policies shall include a copy of the COMPS Order, or a COMPS Order poster published by the Division, with any such handbook, manual, or policies. Every employer that requires employees to sign any handbook, manual, or policy shall, at the same time or promptly thereafter, include a copy of the COMPS Order, or a COMPS Order poster published by the Division, and have the employee sign an acknowledgement of being provided the COMPS Order or the COMPS Order poster.

7.4.3 Translation. Employers with any employees with limited English language ability shall:
(A) use a Spanish-language version of the COMPS Order and poster published by the Division, if the employee(s) in question speak Spanish; or
(B) contact the Division to request that the Division, if possible, provide a version of the COMPS Order and poster in another language that any employee(s) need.

Employers are reminded that, while the much-discussed overtime provisions of COMPS Order 36, Rule 7.4 suggests it will take effect on the COMPS Order’s own effective date of March 16, 2020. Employers should consider therefore complying by posting, distributing and obtaining signed acknowledgement pages for the COMPS Order in its entirety or just the poster, and to do so in English or such other language, including Spanish, as employees “with limited English language ability” may speak.

 

BREAKING NEWS: COMPS Order 36

The Colorado Division of Labor and Employment has just advised as follows:

The Division has posted the Colorado Overtime & Minimum Pay Standards (COMPS) Order #36  Poster on our COMPS Order #36 – Informational Page. This is the “Poster” to use to comply with the “Posting and Distribution Requirements” COMPS Rule 7.4. As a reminder, Colorado Overtime and Minimum Pay Standards Order (“COMPS Order”) #36 is effective March 16, 2020.

The Division has also published guidance in the form of three new INFOs (Interpretive Notice & Formal Opinions) available on the Division’s Laws, Regulations, and Guidance webpage. The three INFOs published today are:

INFO # 1: Colorado Overtime & Minimum Pay Standards Order (COMPS Order) #36

INFO # 2: DLSS Wage Claim Investigation Process

INFO # 3 Tips (Gratuities) and Tipped Employees Under Colorado Wage Law

The Division’s INFOs are not binding law, but they are the Division’s officially approved opinions and notices to employers, employees, and other stakeholders as to how the Division applies and interprets various statutes and rules. The Division will continue to post and update INFOs on various topics; to suggest a topic, please email cdle_labor_standards@state.co.us.

Please continue to check this blog, www.l2slegal.com, where additional information regarding the CDLE’s announcement will be posted soon.

Colorado Court of Appeals clarifies unemployment eligibility rules related to marijuana use

The Colorado Court of Appeals has clarified how Colorado’s medical and recreational marijuana laws impact eligibility for unemployment. The case involved an unusual fact pattern that provided the court with a springboard to articulate four rules. The worker was on medical leave, but worked for a financial institution to which he personally owed money. Although he was on medical leave, he still had to come in occasionally to make payments on the loan he owed his employer. While there to make a payment, HR advised that he had come up for a random drug test, on which he tested positive for marijuana. Thus the Court was faced with a case where the person was still an employee but obviously not engaged in or even able to be engaged in actively performing job duties at the time he was tested.

The lower court looked at only one subsection of the unemployment-eligibility statute, CRS 8-73-108(5)(e)(IX.5). Subsection IX.5 renders a worker who tests positive for even otherwise lawful marijuana to be ineligible for unemployment if the test was taken “during working hours.” Because the employee was on medical leave, the court held his positive test did not arise from a sample taking “during working hours.” The lower court then held that because subsection IX.5 was so specific to marijuana, it was not able to look at other sections of the statute.

The Colorado Court of Appeals reversed. The Court of Appeals held that other subsections still apply, not just IX.5. Looking at all the other subsections, the Colorado Court of Appeals held there are at least four ways a worker can be disqualified form receiving unemployment in Colorado due to otherwise lawful marijuana use:

  1. A positive test “during working hours”;
  2. A positive test during or outside working hours that had or could have had an adverse impact on the company;
  3. A positive test during or outside working hours that interfered with the employee’s job performance;
  4. A positive test during or outside working hours that rendered the employee unable to meet “established job performance or other defined standard.”

Here is the full quote from the Colorado Court of Appeals:

Any conflict among the provisions at issue in this case is not irreconcilable.  Subsection (IX.5) disqualifies an individual for the sole reason that he or she had a positive drug or alcohol test while working, essentially dispensing with the need for an employer to establish any impairment of the employee’s abilities or adverse effect on the employer’s business.  However, subsection (VII) would apply where an employee violates an employer’s rule prohibiting drug use, whether on or off the job, but an employer would be required to demonstrate that the employee’s drug use had, or could have had, adverse impacts on the company.  Similarly, subsection (VIII) could be applied to off-the-job drug use but requires proof that the drug use interfered with the employee’s job performance.  And subsection (XX), when applied in a drug use or testing scenario, requires the employer to establish that an employee’s drug use or failed drug test caused him or her to fail to meet an established job performance or other defined standard.  Because there is no irreconcilable conflict, all provisions of the statute are amenable to harmonious construction, and thus must be given effect.  

Source: M&A Acquisition Corp. v. ICAO, — P.3d —, case no. 19CA0679 (Colo.App. 11/21/19).

Colorado trial courts are not required to blue-pencil non-compete and non-solicit covenants

Even where an agreement says that covenants “shall be” blue-penciled (meaning, rewritten if determined to be unenforceable and narrowed to whatever the court rules would have been enforceable), a trial court in Colorado is not required to do so. In a recent decision, 23 LTD v. Herman, case no. 16CA1095 (Colo.App. 7/25/19), the Colorado Court of Appeals confirmed blue penciling is within a trial court judge’s discretion. The parties cannot, by way of mandatory language like “shall,” not only confer on the judge the authority to re-write their agreement but an obligation to do so.

Simply put, the court is not a party to the agreement, and the parties have no power or authority to enlist the court as their agent. Thus, parties to an employment or noncompete agreement cannot contractually obligate a court to blue pencil noncompete provisions that it determines are unreasonable.

The case is a strong reminder for employers not to over-reach when drafting covenants, non-competes or non-solicits. While a blue penciling clause may give the judge to make some changes like reducing the geographic or temporal reach of the covenant (how many miles/how many months), the parties should not expect a judge will be willing to make changes beyond that, or even of that nature. Whether to blue pencil at all is an issue for each judge.

Fundamentally, it is the obligation of a party who has, and wishes to protect, trade secrets to craft contractual provisions that do so without violating the important public policies of this state.[5] That responsibility does not fall on the shoulders of judges

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).

Reminder, Colorado employers must now provide notice if tip-sharing

Colorado employers are reminded to post a notice, if tip-sharing, for example on menus, at tables, or on receipts, to patrons that “gratuities are shared by employees.” This new posting requirement, Colorado HB 19-1254, took effect August 2, 2019.

Three issues in Colorado regarding vacation pay

Colorado law, CRS 8-4-101 defines vacation to be a part of “wages” when “earned in accordance with the terms of any agreement. If an employer provides paid vacation for an employee, the employer shall pay upon separation from employment all vacation pay earned and determinable in accordance with the terms of any agreement between the employer and the employee.” As such, an employee cannot agree to waive vacation, or any other “wages,” once “earned, pursuant to CRS 8-4-121, and CRS 8-4-109 requires that such vacation, along with all other “wages,” to be paid out in final paychecks.

Despite what seems relatively clear statutory language on first blush, three issues persist. Colorado employers have received some fleshout on at least two.

1. Can an employer impose conditions on the payout of vacation in a final paycheck? The Colorado Court of Appeals says, yes.

A recent Colorado Court of Appeals case suggests the law may not be that simple. In  Nieto v. Clark’s Mkt., Inc. the employer added a twist in its handbook. There, a policy said that an employee “forfeits all earned vacation and pay benefits” if they fail to provide 2-week notice before quitting. The employee cited the foregoing statutes, arguing the vacation could not be waived and had to be paid out in the final paycheck.

The Court of Appeals held for the company. The Court of Appeals looked to the “terms of any agreement,” as required by the statute, in other words, to the language of the vacation policy and held that 2-week notice was a condition of earning the vacation.

Ms. Nieto’s right to compensation for accrued but unused vacation pay depends on the parties’ employment agreement. And that agreement unequivocally says that the vacation pay she seeks wasn’t vested given the circumstances under which she left the Market’s employ.

Is Nieto good law in Colorado, can employers rely comfortably on it? Many would argue that the Colorado Court of Appeals simply got it wrong. However, the deadline for appeal has now passed, so it is certainly the law as between Ms. Nieto and her former employer Clark’s Market, Inc. It is noted too that the decision was selected for official publication, so, unless the Court of Appeals or the Colorado Supreme Court revisit the issue in a future case, it is binding on trial courts. Therefore employers could arguably rely on it for now, so long as they are willing to risk protracted litigation and future appeals.

2. Can an employer apply a use-it-or-lose-it rule to vacation at the end of every year? The Colorado Division of Labor and Employment says, no, but the issue is pending in the Colorado Court of Appeals.

Pending before the Colorado Court of Appeals is Blount, Inc. v. CDLE, in which the Colorado Division of Labor and Employment is asking the Court of Appeals to rule against an employer’s purported use-it-or-lose-it policy. In an apparent effort to end-run the Court’s decision, the CDLE issued on the same day as it filed a brief in the appeal, a new rule (7 CCR 1103-7 rule 2.15) — which it then proceed to rely upon in its brief — stating that employers may not have use-it-or-lose-it policies. How will the Court of Appeals rule? How will the Court of Appeals view the CDLE’s apparent claim-jumping regulation? Will the Court of Appeals take Blount as an opportunity to re-consider or limit Nieto? Stay tuned.

3. Do these same rules apply to PTO or just vacation? The Division of Labor and Employment says, no, these restrictions do not apply to PTO.

As of this summer, callers to the Colorado Division of Labor and Employment will be told it takes the position that these “vacation” rules do not apply to PTO. CRS 8-4-101 speaks only to the inclusion of “vacation” in “wages,” not PTO; therefore, the Division will not currently pursue an administrative wage claim for PTO.

Notwithstanding, employers should realize that some plaintiff attorneys will take such claims to court, but they do so under a contract law theory, not under Colorado’s wage statutes, and as a contract claim, such claims do not carry attorney fees or penalties.

Colorado criminalizes wage theft

Effective January 1, 2020, Colorado has criminalized wage thefts. This new law applies to “employers,” a term defined to be commensurate with the Fair Labor Standards Act’s coverage, and protects “employees,” as defined to exclude independent contractors.

Under this new law it will be a crime to:

  • willfully
  • refuse to pay or “falsely” deny “the amount of a wage claim, or the validity thereof, or that the same is due”
  • “with intent to secure for himself, herself, or another person any discount upon such indebtedness or any underpayment of such indebtedness”
    • “or with intent to annoy, harass, opress, hinder, coerce, delay, or defraud” the employee.”

Who may be charged with this crime? “Every employer or other person who intentionally, individually or as an officer, agent, or employee of a corporation or other person” who “pays or causes to be paid to any such employee a wage less than” that required.

This new crime will rise to the level of a felony if the amount at-issue equals or exceeds $2,000.

Employers, including all individuals involved in the payroll function and related decisions whether or not to pay wages, should anticipate that employees will seek to have such matters prosecuted, in addition to or instead of civil wage claims. This new Colorado law is all the more reason for employers to carefully review their wage compliance efforts.

Reminder, Colorado employers, new ban-the-box law will take effect soon

Colorado employers are reminded that Colorado’s new ban-the-box law will take effect September 1, 2019 for employers with more than 10 employees (then September 1, 20121 for all other employers). Together with the crop of other new Colorado employment laws this year, Colorado employers should:

  • Review and revise their handbooks, workplace policies, and hiring documents accordingly.
  • Review and revise their hiring and promotion practices.
  • Consider undertaking an audit of pay levels as encouraged now by HB19-085.
  • Review wage compliance practices.
  • Train supervisor, manager and HR accordingly.

Colorado’s workers compensation requirement might be unconstitutional, at least in part?

An interesting case is winding its way through the Colorado courts.

In Colorado employers of three or more must carry workers compensation insurance. In this case, the employer employed typically between two and four individuals. It failed to carry workers compensation insurance for three different periods of time. When that came to the attention of the Colorado Department of Labor and Employment, the company was fined a whopping $841,200.

The company fired back by challenging the constitutionality of the state’s fines. The fines were issued pursuant to the formulas in Colorado workers compensation laws, CRS 8-43-409(1)(b) and Rule 3-6(D), 7 CCR 1101-3. The company, nonetheless, contends that the fines are “excessive” and therefore in violation of the United States Constitution’s Eighth Amendment.

In this decision, the Colorado Supreme Court ruled that the company might have a case. The court first held that the Eighth Amendment does apply to and protects corporations from excessive governmental fines, not just individuals. Next, the Court outlined the test for analyzing whether a fine is “excessive,” in other words, prohibited. Then the Court remanded the case for further consideration by the Court of Appeals under this new test.

In sum, we hold that the Eighth Amendment does protect corporations from punitive fines that are excessive. The appropriate test to apply in assessing whether a regulatory fine violates the Excessive Fines Clause is the “gross disproportionality” test. In assessing proportionality, a court should consider whether the gravity of the offense is proportional to the severity of the penalty, considering whether the fine is harsher than fines for comparable offenses in this jurisdiction or than fines for the same offense in other jurisdictions. In considering the severity of the penalty, the ability of the regulated individual or entity to pay is a relevant consideration. And the proportionality analysis should be conducted in reference to the amount of the fine imposed for each offense, not the aggregated total of fines for many offenses.

Will the company win under this new approach? It’s too soon to tell. Interested readers will want to follow this case as it continues to be litigated.

Source: Colorado Department of Labor and Employment v. Dani Hospitality, LLC, case no. 17SC200 (Colo. 6/3/19).

Gov. Polis signs three new Colorado laws into effect

The Denver Business Journal is reporting that Colorado Governor Polis has signed three new Colorado laws into effect. As the DBJ reports, each came with some opposition and will have impacts on employers in Colorado.

Gov. Jared Polis on Monday signed a trio of bills that he said will improve the fortunes of working-class Coloradans — even as opponents have criticized the measures will make life harder for employers and possibly steer companies away from expanding in Colorado.

These laws are:

  1. Colorado House Bill 19-1025 is a “Ban the Box” law. It restricts, with some exceptions, an employer’s ability to inquire, especially on applications, about prior criminal history.
  2. Colorado House Bill 19-1210, which permits local governments to increase the minimum wage in their jurisdictions above Colorado’s statewide minimum.
  3. Colorado HB 19-1306, which requires the Colorado Department of Labor and Employment to report “data that it currently collects regarding the call center work force, including tracking call center jobs and wage analysis of customer service employees,” quoting the bill’s official summary.

These laws now join in effect, the previously signed (May 22, 2019) HB19-085 (Equal Pay for Equal Work Act) and (May 16, 2019) HB19-1267 (criminalizing “wage theft” in cases of willful failure to pay wages owed).

Taken together, employers have good reason to immediately:

  • Review and revise their handbooks, workplace policies, and hiring documents accordingly.
  • Review and revise their hiring and promotion practices.
  • Consider undertaking an audit of pay levels as encouraged now by HB19-085.
  • Review wage compliance practices.
  • Train supervisors, managers and HR accordingly.

 

Denver federal court, one of the most pro-employee?

In what is likely to be a bombshell article amongst Colorado labor and employment attorneys, Bloomberg BNA reported today that its analysis of judicial statistics shows Denver’s federal court to be the most employee-plaintiff friendly of 11 federal courts it has analyzed. “The other courts Bloomberg Law has reviewed are: the Eastern District of New York, the Northern District of Alabama, the Northern District of Illinois, the Western District of Washington, the Middle District of Florida, the Western District of Wisconsin, the Northern District of Texas, the Central District of California, the Western District of Oklahoma, and the Northern District of Ohio.”

The District of Colorado grants employers’ motions for early dismissal—made right after a lawsuit is filed—just 36.7 percent of the time in job bias and similar cases. It dismisses such cases on the eve of trial—following a motion for summary judgment—at a 45.8 percent clip. That gives Denver workers something extra to be cheery about, in addition to the more than 200 beers crafted in the city each day and the playoff-contending Colorado Rockies.

Interested in how particular judges rank? Bloomberg BNA analyzed them individually and provides what it views as the relevant statistics for each, concluding,In all, eight of the 11 judges granted early motions to dismiss in employment cases less than 40 percent of the time.

Source: Workers Suing in Denver Federal Court Feeling Rocky Mountain High, P. Dorrian (9/21/18).

“Colorado denies widow half of late husband’s workers’ compensation due to his marijuana use”

The Denver Post reports, “The state of Colorado is denying half the workers’ compensation death benefits to a woman whose husband died while working on a ski lift because he had marijuana in his system.” Colorado workers compensation law does impose a 50% penalty on workers compensation benefits (not including medical expenses) for workers who violated safety rules, including positive drug tests. The Denver Post article reports that in this, the first case to raise the issue, a worker’s positive test for marijuana, following his having been killed on the job, was deemed grounds to deny his widow 50% of the death benefits to which she and their family would otherwise have been entitled. The case has not been appealed to the courts; it currently remains at the agency level. However the issue is ultimately resolved, the case remains a powerful reminder that marijuana remains, in all states, a criminally prohibited drug. While some states, like Colorado, have exceptions from prosecution for state law enforcement, applicable to medical and even recreational use, those are merely exceptions from criminal law enforcement; the use of marijuana itself remains a criminally prohibited act. 

Source: “Colorado denies widow half of late husband’s workers’ compensation due to his marijuana use,” the Denver Post (7/17/18).

Individual liability possible for wage claims, in Colorado

In a 2003 decision, Leonard v. McMorris, the Colorado Supreme Court ruled that the Colorado Wage Claim Act does not itself create statutory liability for individuals who own or manage a company. But what about other theories?

In a recent decision, Paradine v. Goei, the Colorado Court of Appeals held that Leonard does not foreclose personal liability. Rather, it simply held that the Colorado Wage Claim Act itself cannot be a vehicle for imposing personal liability. The Colorado Court of Appeals held in this case that there are, at least, two other “well-established” theories for holding an individual liable for the acts of a company: “peircing the corporate veil, and when an officer acts on behalf of an undisclosed principal.” Oversimplifying these two principles, (1) the first allows a person to be held liable for the acts of his entity if, in running that entity, he has not obeyed corporate formalities and ignored the distinction between the entity and himself; (2) the latter allows a person to be held liable when he seems to have acted on his own behalf but later wishes to claim, unbeknownst to the plaintiff, that he was actually acting behind an entity.

In this case the Court of Appeals held the plaintiff had adequately pled a case to pierce the corporate veil and was, therefore, entitled to seek discovery in pursuit of his allegations. In particular the court noted the plaintiff alleged that the individual collected the company’s money to be used to pay wages, used the company’s revenues for “his own personal use” and “diverted corporate funds” to pay his own expenses, including his “apartment lease” and “vehicle payments,” treating the company as his “alter ego” while commingling bank accounts and credit cards.”

Paradine will no doubt stimulate the filing of individual liability claims in Colorado wage cases.

Source: Paradine v. Goei, case no. 16CA1909 (Colo.App. 4/19/18).

When an “interstate” driver isn’t, but is …

Both federal law (the Fair Labor Standards Act, “FLSA”) and Colorado law (the Colorado Minimum Wage Act, the Colorado Wage Claim Act, and the Colorado Minimum Wage Order) exempt “interstate drivers.” Under FLSA, a driver can be considered “interstate” if she, like taxi drivers, is subject to the federal Motor Carrier Act, even where she drives only within the state. This means taxi drivers are not entitled to overtime under federal law.

In this case, the Colorado Court of Appeals affirmed the Colorado Department of Labor and Employment’s view that Colorado intended a stricter approach. According to the Court and the DOLE, Colorado’s overtime exemption does require that a driver actually drive across state lines as part of their job. Accordingly, the Court held, Colorado taxi drivers are entitled to overtime under state law, even though they would not be under federal law. As the Court explained, FLSA permits states to adopt stronger protections for employees than federal law. Here, the Court held Colorado did so because Colorado’s overtime exemption is worded slightly differently than FLSA’s.

Remaining issues include the applicability of this ruling to “gig” drivers, like those who drive through Uber or Lyft. Also, while this case has held that taxi drivers who don’t actually drive in and outside the state are entitled to overtime, it did not address whether other parts of Colorado wage law, including minimum wage requirements, also apply to such drivers.

Source: Brunson v. Colorado Cab Company, LLC, case no. 16CA1864 (1/8/18).

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).

Colorado legislative employment law update 2017

The Colorado legislature has closed out its 2017 session. This year’s crop of new employment laws was relatively mild. Highlights included the following:

  • HB17-1214 enhances the Colorado Office of Economic Development’s ability to facilitate employee ownership of existing business. As owners of many business find themselves wanting to retire from their businesses,  the legislature hopes COED will now be better able to help employees to take over ownership.
  • SB17-189 provides employers who need to do background checks involving fingerprints more options than the law enforcement agencies previously permitted.
  • HB17-1021 provides that the Colorado Department of Labor and Employment can release to the public information about employers who have violated state wage laws, but continues to prohibit CDOLE from releasing a company’s trade secrets. Before disclosing information about a company, CDOLE will now provide the employer 20-day notice, allowing it time to object if it believes any information to be disclosed is a trade secret.
  • HB17-1269 expands the reach of preexisting law, which (like the federal National Labor Relations Act) prohibited employers from in turn prohibiting their workers from discussing their wages, hours and working conditions. This bill expands that state law beyond the NLRA to cover even employers who are not subject to the NLRA.
  • HB17-1119 enhances the penalties employers face if they fail to obtain workers compensation coverage for their employees.
  • HB17-1229 fleshes out Colorado’s workers compensation law in regard to mental impairment. It confirms that mental impairment is usually not a recoverable injury, especially when it is the consequence of aspects of the employment relationship, including discharge and discipline. However, workers compensation benefits may be available the mental impairment suffered as a result of a work-related traumatic event.

Failed legislation included the following:

  • HB17-1305 would have brought ban-the-box to Colorado. Ban-the-box laws are being introduced across the country as a way to prohibit employers from asking about an applicant’s criminal history.
  • HB17-1001 would brought back parental leave for children’s academic events (so-called parent-teacher conference leave). In 2009, Colorado passed such a law, but it expired in September 2015 and hasn’t since been revived.

 

Colorado Supreme Court adopts Iqbal-Twombly pleading standard

Under the federal and state rules of civil procedure, are not required to provide much specificity in their pleadings. Indeed the oft-cited rule is that they must simply give “notice” of their claims. This notice pleading rule was tightened in a pair of 2007 U.S. Supreme Court cases, called Iqbal and Twombly. The Iqbal-Twombly standard continues to impose a notice requirement but explains that, in order to give sufficient notice, a plaintiff must plead enough specific facts to raise their claims “above the speculative level,” such that, if the specifically pled facts are true, he would be entitled to relief under “a plausible claim.” This new notice pleading requirement is often called the “plausibility standard.” State supreme courts are free to decide their own rules of procedure. In this case, the Colorado Supreme Court adopted Iqbal-Twombly’s plausibilty standard.

The case is Warne v. Hall, 2016 CO 50 (Colo. 6/27/16).