Accusations of wage violations have just a two- or three-year statute of limitations, the Colorado Supreme Court ruled this week, overturning a lower-court decision that workers could sue for back pay and benefits as long as six years after the alleged malfeasance.
In deciding the three-year-old case of Samuel Perez vs. By The Rockies LLC, the state’s highest court, by a 6-0 decision, ended a dispute that employers and business groups have watched closely. The ruling establishes a statute of limitations on wage claims that was absent from the Colorado Minimum Wage Act and clarifies that legislators intended in other statutes to harmonize state and federal law on this issue.
Business groups celebrated the decision that came down Monday, saying that it puts parameters around wage claims in a way that employers now know how long they must maintain critical information on past workers.
“Businesses need clarity and predictability in the law to operate effectively,” said Loren Furman, president/CEO of the Colorado Chamber of Commerce, which filed an amici curiae brief with the U.S. Chamber of Commerce backing a shorter statute of limitations. “The unanimous ruling ensures that Colorado employers don’t face overly burdensome record-keeping requirements and provides consistency between state and federal law when it comes to minimum-wage labor disputes.”
Origin of the case
Perez was an hourly fast-food worker in 2016 and 2017 who claimed that the restaurant franchisee By the Rockies LLC failed to give him and other employees their required meal and rest breaks during their shifts. But he did not file the case alleging his employer had violated the Colorado Minimum Wage Act until 2022. The restaurateur argued that the two-year limitations period specifically outlined in the Colorado Wage Claim Act had expired and asked a district court to dismiss the case.
The court did just that, finding that although the Minimum Wage Act did not specify a limitations period, it was part of the same statutory scheme as the Wage Claim Act and, thus. the WCA’s limitations applied in this case. However, the Colorado Court of Appeals overturned that decision, writing that the limitations period set forth in the Wage Claim Act only applies to claims brought pursuant to that law, which Perez’s lawsuit was not.
In finding that state law limits wage claims to two years for non-willful violations of law — or three years if violations are determined to be willful — the Colorado Supreme Court decision turned on several points.
A “single scheme” of wage laws
First, it determined that whether a private right of action is brought under the Minimum Wage Act or Wage Claim Act, the purpose of the action is to recover unpaid wages. Thus, the two laws are part of the same comprehensive scheme addressing the same subject matter, and the law among them that sets a specific limitations period must be followed.
“In the absence of any clear intent to the contrary, statutes that are part of a single scheme or that deal with the same subject should be construed harmoniously, to avoid absurdities,” wrote Justice Maria Berkenkotter for the court.
Second, it concluded that the fact that state law requiring employers to keep pay records for two years lines up with the maximum period of liability under the Wage Claims Act is not merely a coincidence. Even a more recent addition to statutes, the Colorado Overtime and Minimum Pay Standards Order, offers just a two-year limit on filing claims and further supports the idea that the Legislature intended a two-year window for lawsuits, it ruled.
Finally, the decision noted the most recent repeal and re-enactment of Colorado’s wage laws sought to bring state statutes in line with the federal Fair Labor Standards Act, which has two- and three-year limitations.
Decision affects record-keeping responsibilities
In its amici curiae brief, the U.S. Chamber and Colorado Chamber had noted that applying a six-year limitations period would disrupt the overall statutory scheme and impose inconsistent record-keeping burdens on Colorado employers. It also would “revive stale claims, thus undermining the very purpose of the statute of limitations,” it wrote.
Perez’s attorneys had argued also that even if the more restrictive limitations period in the Wage Claims Act was applicable, the Legislature had included in the Minimum Wage Act an explicit directive to interpret it as liberally as possible to maximize worker protection.
But because this interpretation would allow workers to reach back just two years for general wage claims but six years specifically for minimum-wage claims, the court found that approach would be “illogical” and denied this interpretation.
As such, the Supreme Court reversed the ruling of the lower court and remanded the case to the appellate court with directions to reinstate the district court’s order of dismissal.
Wage disputes are legislative fodder too
The decision comes during a time when legislators continue to debate workers’ rights and particularly the rights of lower-paid workers.
Earlier this year, for example, legislators rejected a bill that would have allowed employers in cities and counties with minimum-wage rates above the state minimum to use the state tip-credit level for paying tipped workers like servers and bartenders.
The tip credit establishes that the minimum wage for tipped workers may be $3.02 less per hour than for other workers. With cities like Denver having minimum wages as much as $4 above the state floor wage, that means their minimum pay levels for tipped workers can also be $4 more an hour than the state’s level of $11.79 for those workers.
In a compromise, legislators passed a law allowing local governments to keep the tip-credit level at the state level or to roll it back to the state level if they have risen it above that level already. As of now, however, no city has made an effort to move its tip-credit level.