You should know: New Changes to Colorado Employment Law

Hey Business Owners-

There have been a number of recent changes to Colorado law around employment that could have an impact on your business. First, there have been changes around the requirements for paid sick leave, both in light of the Covid-19 pandemic and accrued sick leave. Additionally, there are new restrictions around the enforceability of noncompete clauses and restrictive covenants. Finally, the Colorado Department of Labor and Employment has a new requirement that employers provide a form at any employee’s separation informing them of their rights concerning unemployment benefits.

Paid Sick Leave

Under the new rules, every employer has to provide 1 hour of paid sick leave for every 30 hours worked, up to a maximum of 48 hours per year. Employees start accruing this time as soon as they start work and, if they are overtime exempt employees, this is accrued based upon the assumption that the employee works 40 hours per week. Paid sick leave may be used for the following purposes:

- The employee has a mental or physical illness, injury, or condition; needs a medical diagnosis, care, or treatment related to such illness, injury or condition; or needs to obtain preventative medical care;

- The employee is caring for a family member who has a mental or physical illness, injury, or condition; needs a medical diagnosis, care, or treatment related to such illness, injury, or condition; or needs to obtain preventative care;

- The employee or family member has been the victim of domestic abuse, sexual assault, or harassment and needs to be absent from work for purposes related to such crime; or

- A public official has ordered the closure of the school or place of care of the employee’s child or of the employee’s place of business due to a health emergency, necessitating the employee’s absence from work.

Employers are required to let unused time carry over, but employers do not have to let employees use more than 48 hours per year (caveat to this is discussed below). Effectively this means that someone who doesn’t use their hours can carry them over and use all 48 hours in January. The employee would still accrue more time over the next year, but you would not be required to let them use the additional accrued time. Importantly, employers are not required to pay out unused time if the employee is terminated or quits, but an employee may sue and recover damages for unused time if the employer engaged in retaliatory actions that prevented the use of the paid sick leave by the employee. If an employee is terminated or quits but is rehired within 6 months, the employer is required to reinstate any accrued but unused paid sick leave the employee had at the time of termination and which had not been converted to monetary compensation at the time of termination (should the employer choose to make such a conversion, which is, again, not required).

The second piece of this legislation pertains to times of public health emergencies. In addition to the requirement for up to 48 hours of paid sick leave, whenever there is a declared public health emergency, an employer must ensure that an employee may take the following amounts of additional paid sick leave (which need to be in accordance with the purposes provided above, in addition to those enumerate below):

- For employees who normally work 40 or more hours in a week, at least 80 hours;

- For employees who normally work fewer than 40 hours a week, the amount of time the employee is scheduled to work in a 14-day period or the amount of time the employee actually works on an average 14-day period, whichever is greater.

For this, the employer is required to supplement the accrued paid sick leave as necessary to ensure that the employee may take up to the time listed above for each public health emergency declared. The employer may count an employee’s unused accrued paid sick leave toward the supplemental paid sick leave required in this section.

In addition to the purposes enumerated above pertaining to accrued sick leave, the employees are entitled to use sick leave for a declared public health emergency to:

- Self-isolate and care for oneself because the employee is diagnosed with a communicable illness that is the cause of the public health emergency;

- Self-isolate and care for oneself because the employee is experiencing symptoms of a communicable illness that is the cause of the public health emergency;

- Seek or obtain medical diagnosis, care, treatment if experiencing symptoms of a communicable illness that is the cause of the public health emergency;

- Seek preventative care concerning a communicable illness that is the cause of the public health emergency; or

- Care for a family member who is doing any of these things listed above;

While the public health emergency declaration related to Covid-19 is expected to expire in May 2023, it is important to be aware of these provisions.

Restrictions to Enforcement of Restrictive Covenants

Beginning August 10, 2022, Colorado narrowed the circumstances in which Colorado employers can seek to enforce noncompete and other restrictive employment agreements. The statute:

• Only allows for non-compete agreements that are: (1) entered into with a worker making at least the cap for “highly compensated” workers ($112,500 annually as of 1/1/2023); (2) designed to protect trade secrets; and (3) are not broader than necessary to protect the employer’s “legitimate interest in protecting trade secrets.”

• Only allows agreements not to solicit customers that are: (1) entered into with a worker making not less than 60% of the salary requirement for a highly compensated employee ($67,500 annually as of 1/1/2023); and are (2) not broader than necessary to protect trade secrets.

• Requires a separate, written advance notice to an employee and time for them to review the proposed non-competition or non-solicitation agreement and requires most agreements to be in a separate writing.

The primary change is that the prior law allowed non-compete agreements to be enforceable against executive and management personnel regardless of salary, whereas the new law allows such agreements to be enforceable based on salary, regardless of position.

The new law continues to permit agreements related to the sale of a business, recovering the cost of training an employee, and to protect confidential business information.

The law modifies the prior law in several other ways:

• Choice of Law. The law prohibits the enforcement of a restrictive covenant agreement outside of Colorado against a worker who primarily resided or worked in Colorado at the time of termination. Colorado law will govern the enforceability of non-compete and non-solicitation agreements for employees who lived and worked in Colorado at the time of separation from employment.

• Penalty Provisions and Private Right of Action. The new law imposes a criminal penalty (a class 2 misdemeanor) for violation of the statute based on it being unlawful to intimidate worker. The law also creates a new damages system for employers presenting or attempting to enter into or enforce void restrictive covenant agreements. Any employer that violates the law will be liable for actual damages and a penalty of $5,000 per worker (or prospective worker) harmed by a violation. The law includes a private right of action to enforce the statute and seek injunctive relief; and permits the Attorney General to seek the same relief on behalf of individuals. A worker may recover actual damages, reasonable costs and attorneys’ fees related to a private cause of action. The law does provide an exception from the penalty subsection for employers able to demonstrate a good faith belief that they believed they were following the requirements of the statute.

There are additional pitfalls for employers under the new non-compete law in Colorado, so it is important to have any employment agreements drafted prior to August 2022 reviewed to ensure compliance.

New Job Separation Form

When an employee separates, whether voluntary or a termination, Colorado law (See C.R.S. §8-74-101(4)) now requirements employers to provide a Notice of Potential Availability of Unemployment Insurance Benefits, which can be viewed here.This form may be provided in electronic or hardcopy format with the information that matches payroll records.