Colorado employers will need to work a little bit harder to ensure that they are not misclassifying employees as contractors and are not shorting anyone on pay or benefits, as the state’s latest effort to fight wage theft officially goes into effect on Wednesday.
House Bill 1001, which was introduced on the first day of the 2025 legislative session and received final approval on the last day, is a multi-pronged effort to ramp up administrative and civil penalties against employers who commit the crime. While wage theft can involve a flat-out refusal to pay wages, it also can occur when workers don’t get benefits or allotted break times, when overtime isn’t paid at time-and-a-half to hourly employees and when full-time workers are classified as benefit-less contractors.
Legislative Democrats have pursued enforcement boosts of wage-theft law for more than a decade but saw their first setback in 2024 when Gov. Jared Polis vetoed a bill to require construction general contractors to pay wages if subcontractors stiffed their workers. Their return effort in 2025 widened their focus from the construction sector to all industries and tackles the issue in a wide variety of ways.
What the new law does
The provisions of the new law, which is going into effect Wednesday with a bevy of other laws 90 days after adjournment of the 2025 session, include:
- Employers found misclassifying employees as contractors will be subject to fines that begin at $5,000 for a willful violation and rise to as much as $50,000 per instance for subsequent willful violations that are not remedied within 60 days;
- Enforcement of the law and the ability of workers to file lawsuits against alleged violators will grow from employees to include independent contractors, which will expand the scope of the law substantially;
- Employers who take an adverse action against employees within 90 days of those workers filing a wage-theft complaint will be assumed to be retaliating against them. Business groups sought removal of this clause, but sponsors instead expanded the provision to say that workers disciplined more than 90 days after filing complaints also could argue that they were targeted for retaliation;
- Colorado Department of Labor and Employment administrators can go beyond lost wages and award compensatory damages and attorneys’ fees in discrimination or retaliation claims;
- Changes to current law make it more difficult for defendant employers to be awarded costs and attorney fees when they argue legal actions against them were meritless; and,
- Complainants will be able to seek damages not just from majority owners of the companies but from minority owners who hold at least a 25% share of the business, the law clarifies.
Preventing both wage theft and retaliation
Colorado House Majority Leader Monica Duran explains her wage-theft bill to a skeptical group of Republicans on the House Business Affairs and Labor Committee in January.
Another major provision of the law takes effect in July 2026 — a clause that expands from $7,500 to $13,000 the maximum size of a wage-theft claim that can be investigated by CDLE. Business leaders had pushed for this change for years, believing it will keep more claims adjudicated administratively rather than filed as lawsuits.
The main purpose of the bill is to allow workers to access their owed wages more quickly and to strengthen protections for whistleblowers, said House Majority Leader Monica Duran, a Wheat Ridge Democrat and primary cosponsor of the measure. A 2022 Colorado Fiscal Institute study estimated that employers commit $728 million in wage theft annually, with the construction, food service and retail industries seeing a disproportionate share of the activity.
“When employers refuse to pay their employees for the work they’ve already completed, it is the same thing as stealing money out of their wallet,” said Rep. Meg Froelich, a Greenwood Village Democrat and cosponsor of the bill, in a news release. “Wage theft hurts Colorado workers and families who are struggling to make ends meet. Now that this legislation is in effect, we are providing better support for workers to ensure they can be fairly paid for the work they do.”
Several concerns for employers
While employer groups agreed with the need to fight wage theft, they opposed several of the provisions of the bill. The fines for misclassification of employees are punitive, particularly as there is sometimes a blurry line between contractors and workers, and the anti-retaliation provisions prevent employers from being able to discipline workers who have filed complaints, even when they may be breaking company rules.
Luke Gilewski, an associate with the Littler law firm who focuses on wage-and-hour litigation, said that employers will need to take several steps to ensure they are in compliance with the new law.
Those who use contractors should re-evaluate how they classify employees, as failure to do so correctly in the eyes of state regulators could double a $5,000 fine per worker to $10,000 if not remedied within 60 days, even when the oversight is inadvertent. A significant question to help determine the answer, Gilewski said, is: Is this person doing the primary work of this business or are they doing more tangential work that can be contracted out rather than required of an employee?
“I think one thing businesses can do is review whether your contractors are doing the same work as your W-2s,” he said.
Wage-theft complaints must be dealt with quickly
Luke Gilewski, an associate with Littler
Employers also should examine whether they can strengthen protection for workers against retaliation, as this portion of the law can carry heavy penalties, Gilewski said. And if they are accused of wage-theft violations, they need to look to remedy them quickly, as CDLE has authority to waive penalties if payments are made within 14 days of a complaint being filed with the department.
“Now workers are incentivized, starting in July 2026, to file complaints with the agency even more,” Gilewski added.
The increased involvement of the CDLE administrative process, rather than the prolonged court-filing process, is a primary reason that backers of the bill say it will result in quicker payouts for workers. CDLE also must post a list of wage-theft violators on its website, according to the new law, and must report violators to licensing and permitting bodies, where they could face separate sanctions.