Colorado lawmakers are proposing sweeping reforms to the state’s wage theft enforcement laws to better protect workers from business malpractice — but some groups fear some provisions could put employers at a disadvantage.

House Bill 25-1001, sponsored by Democratic lawmakers, attempts to make it easier for victims of wage theft to recover stolen wages through the claims process and for the Department of Labor to punish bad actors, improve transparency and protect the rights of workers under wage and hour laws.

An estimated $728 million in wages are stolen from nearly 440,000 workers each year in Colorado, according to a 2022 comprehensive analysis by the Colorado Fiscal Institute.

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In addition to enhancing wage protections by outlawing payroll deductions below minimum wage, the bill would create stricter penalties for employers who “take shortcuts” to deny fair payment to their employees and expand the responsibility for wage theft onto some stakeholders.

“It’s really about ramped-up enforcement,” Rep. Meg Froelich, D-Englewood, said. “How do we actually go after folks, and how do we make it easier for the worker to file these claims?”

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The bill strengthens protections for immigrant workers against retaliation, specifically from employers who threaten an employee’s legal status to keep them from reporting wage theft. This provision is especially prevalent for Latino workers in Colorado, who were the demographic group most likely to experience wage theft in 2022, according to the Colorado Fiscal Institute. 

Stricter penalties for violators

The bill proposes punishing employers caught misclassifying their employees as non-employees or independent contractors, which results in illegal deductions from a worker’s compensation. These employers could face escalating fines from $5,000 for a first violation to as much as $50,000 for repeated offenses.

“Bad actors use (misclassification) to avoid paying benefits, unemployment insurance, workers’ compensation insurance, or other benefits workers are owed under the law,” prime sponsor and House Majority Leader Monica Duran told the Finance Committee in February. “This is already illegal, but the increased penalties in this bill give teeth to the law and will deter bad actors from using this practice to pay workers less, or not at all.”

Current laws have been criticized for being too easy on violators, since in Colorado alone there have been nearly 15,000 violations by repeat offenders on minimum wage and overtime violations since 2005, with nearly 14,000 workers found employed in violation by these repeat offenders, according to the Colorado Fiscal Institute.

“In other words, bad actors are committing wage theft, getting caught, and then continuing to violate the law because current enforcement is so weak,” said Sophie Mariam, a labor policy analyst with the Colorado Fiscal Institute. “This suggests that the benefits of wage theft outweigh the cost of compliance.”

Under the bill, the cap for wage theft would be raised from $7,500 to $13,000 with adjustment room for inflation, allowing more workers to recover their full stolen wages through claims with the Colorado Department of Labor and Employment instead of having to spend time and money on private legal representation.

Who’s at fault for wage theft?

Duran said the bill also seeks to strengthen accountability on the part of the employer. The legislation’s draft redefines “employer” to include individuals holding or controlling at least 25% ownership stake in a business — a change that received some pushback from Colorado business leaders.

Michael Smith, the state director for the National Federation of Independent Business in Colorado, told the Finance Committee that defining an employer as an individual with 25% ownership — and therefore forcing investors to share the responsibility for wage theft — could be problematic for individual investors who are not involved with the operations of a small business.

Smith added that the bill’s provision to publish the names of businesses with violations, and notify other state agencies if the wage violations are not remedied within 60 days for the purpose of potentially revoking licenses or permits, is viewed by his organization as an unfriendly business practice.

“I do recognize there’s bad actors. The vast majority of small business owners, however, abide by the law and typically find a way to pay their employees before themselves,” Smith said. “Administrative burdens are some of the biggest challenges for honest and hardworking small business owners as they typically don’t have compliance departments, legal teams to keep up with compliance provisions that are brought down by the state.”

The provision also brought forth concerns from restaurant and business owners that outside investors would be less inclined to invest if it caused them to share responsibility for wage theft disparities committed by the owner.

The bill has since been amended to state that those with 25% to 49% ownership can avoid liability if they can demonstrate that they have not had day-to-day occupational control of the business, which concerned parties said was a move in the right direction.

Western Slope business leaders weigh concerns

Although provisions surrounding increased resources and jurisdiction for the Department of Labor, grace periods where employers can pay owed wages without being penalized, and increased transparency have been popular among Colorado business organizations, many voiced similar concerns over how this could impact smaller companies on the Western Slope.

“There’s some good things in this bill,” said Chris Romer, president and CEO of Vail Valley Partnership. “Wage theft is a crime. No one condones wage theft … but there are some components of the bill that we do oppose.” 

Roughly 80% of businesses in Eagle County have fewer than 10 employees, Romer said — which isn’t far off for several municipalities across the Western Slope. For small business communities without the staff to closely monitor labor law compliance, it can be more challenging to manage wage theft claims and lawsuits.

The bill also introduces compensatory damages for economic and non-economic harm, meaning additional costs for employers if they are found liable.

“A small business that has five or eight or 15 employees … they’re worried about the day-to-day operational aspect of their business, and they’re not acting out of malice,” Romer said. “It’s almost always accidental oversight.”

The bill already proposes general protections for all employees who face retaliation from businesses for taking protection under wage and hour laws. Not all organizations agree with the methods for determining retaliatory action, however.

Language in the bill makes it so that an adverse action toward an employee within 90 days of them filing a wage theft claim could be presumed as retaliation from the employer, and expands the pool of potential plaintiffs from direct employees of a company to “an employee or worker.”

“The timing is already considered by judges and juries. So creating a de facto presumption that a first adverse action within 90 days of the activity accounts to retaliation … that’s stacking the deck a little bit,” Romer said.

“For us, that’s just deeply unfair because it assumes a set of facts that we don’t know,” said Meghan Dollar, senior vice president of government affairs for the Colorado Chamber of Commerce.

Under an existing statute, employers can recover attorney’s fees if they pay all demanded wages within 14 days of receiving a claim. This bill would strike that language from the statute.

On the other hand, workers who win a retaliation or wage claim case must be awarded reasonable attorney’s fees and costs.

While one side argues that the change will give voice to employees who may be fearful to file a claim because of the costs, the other side argues small businesses will suffer if they can’t recoup legal fees in cases where they successfully defend against claims.

“If the employer is being a good actor and wins in a frivolous lawsuit, then why should they not be able to collect attorney’s fees when their time has been wasted?” Dollar said.

Colorado’s strict regulatory environment has already posed significant challenges to small businesses. Just last year, a report identified Colorado as the sixth-most regulated state in the nation. The chamber of commerce fears these particular provisions could make it more difficult to conduct business in the state for some industries.

“Particularly from the restaurant industry … they are really concerned with this because they feel like this is kind of another regulatory hoop to jump through,” Dollar said. “We at the chamber have spent a lot of time really digging into the regulatory environment in Colorado, and it’s substantial.”

Dollar said the chamber is supportive of decreasing instances of wage theft in the state through penalties and holding businesses accountable, so long as the bill language doesn’t also place good actors in the crossfire.

“We’re trying to work with those folks. We passed one amendment, and we’ll probably run a couple more to answer some of those (concerns),” Froelich said. “But we’re being careful not to defeat the purpose of the bill.”

The cost of eliminating wage theft

According to the bill’s fiscal note, the bill is expected to increase state revenue to the Wage Theft Enforcement Fund by roughly $50,000 in 2026-27 and $100,000 in 2027-28 and subsequent years as a result of new fines on employers for misclassifying employees.

The fund, which is subject to Colorado’s Taxpayer’s Bill of Rights, uses fines paid by employers to pay any workers who they have failed to pay — though the Colorado Department of Labor and Employment may waive these fines to encourage the employers to pay the missing wages and penalties to their employers.

In terms of cost for the state, the bill is projected to increase the Department of Labor and Employment’s yearly expenditures by $318,000 during the 2025-26 fiscal year and up to $1.3 million in 2026-27.

Much of the funding would support the hiring of staff to manage the anticipated increase in wage claim investigations and enforcement actions, which adds up to 10.7 full-time employees, according to the bill’s fiscal note.

“We really hope that the sections of the bill that provide more resources to (the Department of Labor and Employment) stay, because we do see that as a real solution to that problem,” Dollar said.

Similar wage theft bills have passed in prior years, with the most recent attempt vetoed in 2024 despite receiving approval from both chambers. The bill would have emphasized wage theft as a significant issue in the state.

Froelich said the bill sponsors worked closely with Gov. Jared Polis beginning in the summer of 2024 “to get (the bill) to a place where the governor was on board,” after his previous veto.

“That’s indicative that leadership wants it,” Froelich said. “As long as the labor community wants it, which they do, and as long as they feel that this is a win for workers, then you know this is not a bad way to go.”

The 2025 bill was referred to the appropriations committee and awaits further legislative action.