Colorado Amends Wage Compliance Rules, Revises Recordkeeping Requirements, and Implements New Youth Employment Standards

The Colorado Department of Labor and Employment (CDLE) has adopted COMPS Order #40, amending administrative regulations implementing the Colorado Wage Act, and released an updated COMPS Order poster. The revisions, which took effect on February 1, 2026, expand the definition of “employer,” allow localities to increase tip credits consistent with recent statutory amendments, and increase employers’ recordkeeping obligations for vacation and sick leave. Colorado also adopted final rules implementing the Colorado Youth Employment Opportunity Act, increasing compliance obligations for employers that hire minors, and amended Wage Protection Rules, which modify the calculation of the pay rate for sick pay under the Healthy Families and Workplaces ACT (HFWA).

Background on COMPS Order #40

The Colorado Wage Act authorizes CDLE’s Division of Labor Standards and Statistics (“the Division”) to issue Colorado Overtime and Minimum Pay Standards (COMPS) Orders governing wages, hours, and working conditions. COMPS Order #40 updates the agency’s existing regulations to reflect legislative changes enacted in 2025 and to clarify compliance expectations for employers operating in Colorado. 

Expanded Definition of “Employer”

COMPS Order #40 broadens who may be treated as an “employer” under the Colorado Wage Act. Under the prior regulations, the definition of “employer” had the same meaning as that provided under the federal Fair Labor Standards Act. Under the amended regulations, the definition of employer now includes individuals who own or control at least 25 percent of an employer’s ownership interests. A minority owner may be excluded from the definition only if the employer can demonstrate that the owner has fully delegated authority over day‑to‑day operations. As before, the definition does not apply to the State of Colorado, its agencies, or political subdivisions. 

Localities With Higher Minimum Wage Authorized to Increase Tip Credit

The amendments also align the COMPS regulations with statutory changes affecting tipped employees. Employers must continue to pay tipped employees at least the statewide tipped minimum wage as a direct wage and, generally, may apply a statewide tip credit of up to $3.02 per hour. However, in 2025 the state legislature authorized local governments that have adopted a minimum wage higher than the state minimum wage to authorize a higher tip credit.  The regulations reflect that, when this occurs, employers may apply the locally authorized tip credit. In all cases, employers must ensure that an employee’s direct wages plus tips equal at least the applicable minimum wage and must make up any shortfall in direct wages. 

Expanded Recordkeeping for Vacation and Sick Leave

COMPS Order #40 increases the scope of required employee records. As a reminder, Colorado employers have already been required to retain the following records:

• name, address, occupation, and date of hire of the employee;
• date of birth, if the employee is under 18 years of age;
• daily record of all hours worked;
• record of credits claimed and of tips; and
• regular rates of pay, gross wages earned, withholdings made, and net amounts paid each pay period.

Under the amended regulations, employers must now also maintain records showing:

• vacation pay hours accrued, used, and available during the current benefit year; and
• HFWA or sick leave hours accrued, used, and available, to the extent tracked separately from vacation time. 

The amended regulations also clarify that employers may provide leave balance information on pay statements and must do so in writing or electronically if an employee requests it, no more than once per month unless employer policy allows more frequent requests. Employers may choose the method of disclosure, including pay stubs, electronic self‑service systems, or separate written or electronic communications.

HFWA Pay Rate

Since the HFWA was enacted in 2020, the Division has tweaked the requirements for determining the rate of pay for sick leave under the law, and the 2026 amendments to the Wage Protection Rules continued that trend. 

Under the text of the HFWA, employees must be paid for sick leave at the same hourly rate or salary, excluding overtime, bonuses, or holiday pay, as the employee normally earns during hours worked. That calculation is straightforward enough when employees are compensated on a salary basis, but it can become more complex if employees are paid varying rates for time worked.

The amended Wage Protection Rules set forth a number of new principles regarding how to calculate pay rate based on a variety of different forms of compensation:

• Salary, Commission, or Piece Rate Pay. If the use of leave does not reduce an employee’s pay, such as if the employee is paid solely on a salary, commission, or piece rate basis and the leave does not impact those forms of compensation, then the employee does not earn any additional compensation solely for using leave.
• Salary Plus Commission. If an employee is paid based on salary plus a commission, then the commission is not included in the pay rate.
• Multiple Pay Rates. If an employee works at multiple rates, such as if they earn shift differentials or work separate jobs for the same employer, the employee is paid the rate they would have earned during the period of sick leave if such a schedule is known at the time the sick leave request is made. For example, if an employee was scheduled to work a shift with a shift differential and then calls in sick, the pay rate for sick leave includes the shift differential. 

However, if an employee’s schedule is unknown at the time the need for leave arises, then employers calculate the pay rate by using the most recent time period preceding the leave, either the 30 calendar days or full pay period(s) totaling 28 to 31 days. This lookback period includes hourly or salary rates, shift differentials, tip credits, and commissions (if the employee earns wages plus commission), but it does not include overtime, bonuses, or holiday pay. Lastly, if the employee has not been employed for a full look-back period, then the period will consist of all days worked prior to the leave.

Of course, regardless of the situation, employees must be paid at least the applicable minimum wage for their usage of sick leave.

Additional Protections for Youth Employment

Colorado has adopted final rules to administer and enforce the Colorado Youth Employment Opportunity Act (CYEOA), which significantly expands compliance obligations for employers that hire minors.

Existing regulations require employers to keep records of specific information for employees. Under the final rules, employers must also obtain and keep records of the following information until three years after the minor turns 18 or employment ends, whichever is sooner: 

• Any exemption allowing the minor to work hours or job duties otherwise prohibited by the CYEOA, including records of any apprenticeship completion or technical training;
• The minor’s age certificate and any related documents;
• Any proof of a high school diploma, passing score on a GED examination, or completion of a career and technical education program; and
• Any school release permit or related documents.

The rules further expand and detail prohibited employment for minors, including restrictions on hazardous occupations, use of power‑driven equipment, exposure to toxic substances, and employment in certain establishments such as liquor stores, operation of power-driven machinery, some manufacturing industries, marijuana dispensaries, casinos, and adult entertainment venues. Additional limitations apply to minors under 16 and under 14.

The CYEOA also allows any employer, minor, minor’s parent or guardian, school official, or youth employment specialist to request that the minor be exempt from a provision of the law.

Although the CYEOA permits non‑emancipated minors to be paid 15 percent below the minimum wage, employers must document eligibility for the subminimum wage, and any minor employed in violation of the CYEOA or its rules must be paid the full minimum wage.

The new rules clarify the Division’s authority under the CYEOA to investigate complaints, assess penalties, and issue written determinations ordering corrective action, fines, or damages to affected minors. A determination will describe what provision(s) of the law were adhered to or were violated, and, if a violation has occurred, what steps the employer must take to cure it. Determinations may also include orders to cease non-compliant activity, issue established fines under the CYEOA, order damages to the aggrieved minor, or any other remedies authorized by law. After issuing a determination, the Division may issue additional determinations ordering penalties for each offense by the employer without sending an additional notice of the complaint.

Any party to the claim may appeal the Division’s determination using established procedures for appealing a wage claim determination under state regulations.

What This Means for Employers

The updated regulations increase compliance risk for employers by expanding potential individual liability, provide the opportunity for larger tip credits if enacted under local wage ordinances, impose additional recordkeeping obligations for vacation and sick pay, modify the rules for calculating rate of pay for sick leave, and tighten rules governing the employment of minors. Employers should review Colorado recordkeeping, youth employment policies, and vacation and sick time tracking and pay rate procedures, and ensure that updated COMPS Order posters are properly distributed and incorporated into handbooks.