2025 Colorado Labor & Employment Year End Review

In 2025, Colorado enacted legislation or published regulations on a broad array of topics including wages, leave, discrimination, restrictive covenants, and privacy protections. These developments underscore that the state has become a challenging jurisdiction for employers. We provide an overview of these legal developments below.

Colorado Wage Act Amendments

Colorado legislation (HB25-1001) went into effect on August 6, 2025, making significant changes to the Colorado Wage Claim Act (CWCA). These changes - explained below - expand employer liability, increase remedies and penalties, and make it more difficult for employers to recover fees and costs. Employers should review their policies and procedures, wage practices, and independent contractor classifications to ensure compliance.

• Broader Definition of "Employer": Each individual who owns or controls at least 25% of a business is liable under the newly expanded definition of employer, other than minority owners who can show that they fully delegated control over day-to-day operations.
  
• New Standard for Employers to Recover Attorney Fees: For an employer to recover attorney fees and costs, the court must find that the employee pursued an action "lacking substantial justification." Colorado's Judicial Act defines lacking substantial justification as "substantially frivolous, substantially groundless, or substantially vexatious." This is more restrictive than the prior standard, which allowed for the recovery of fees if the employee recovered less than the amount tendered by the employer.
  
• Increased Legal Remedies Available to Employees: Employees can now seek equitable relief under the CWCA (in addition to monetary damages) to deter future violations and prevent unjust enrichment. The Act now also allows employees to seek compensatory damages in court for both economic and noneconomic injuries, including emotional distress.
  
• Automatic Fines for Employee Misclassification: The amendments create new, automatic fines for misclassifying workers as non-employees (i.e., independent contractors). The automatic fines will be adjusted for inflation every two years beginning January 1, 2028. Currently, the automatic fines are: $5,000 for a willful violation; $10,000 for violations not remedied within 60 days; $25,000 for a second or subsequent willful violation within five years; and $50,000 for a second or subsequent willful violation not remedied within 60 days.
  
• Stronger Retaliation Protections for Employees: The amendments expand the CWCA's anti-retaliation provisions to include two new protected activities: (1) raising good-faith concerns about an employer's compliance with wage and hour laws; and (2) providing information to any person about their legal rights and remedies under wage and hour laws. There is now a presumption of retaliation when an adverse employment action occurs within 90 days of an employee's protected activity.
  
• One-Time Penalty Waiver for Wage Violations: If an employer fails to pay an employee all wages due within 14 days of receiving an initial written demand, the employer can be subject to automatic penalties under the CWCA (the greater of two times the amount of the unpaid wages or compensation or $1,000, or the greater of three times the amount of the unpaid wages or compensation or $3,000 for willful violations). With the amendments, employers will now have the opportunity to receive a one-time waiver of these penalties if an employer pays all wages due within 14 days of receiving an official administrative complaint. Employers should be mindful that this penalty waiver is only available once within five years.
  
• Expanded CDLE Jurisdiction: Beginning July 1, 2026, the jurisdiction of the Colorado Department of Labor & Employment (CDLE) to investigate wage complaints will increase from $7,500 per employee to $13,000 per employee (exclusive of penalties and fines).
  
• Expanded Reporting of Violations: When the CDLE finds that an employer violated the CWCA, the Department is now required to publish on its website the citation, determination, opinion, and employer name. The CDLE must also report any employer that does not remedy a willful violation within 60 days of the Department's finding to the applicable government licensing, permitting, registration, and credentialing bodies. For all other violations, the CDLE may choose, but is not required, to report an employer to such authorities.

Paid Neonatal Care Leave Through FAMLI

In 2025, Colorado amended its Family and Medical Leave Insurance (FAMLI) law and thereby became the first state in the nation to offer paid leave for employees whose newborns require care in a neonatal intensive care unit (NICU).

Effective January 1, 2026, Neonatal Care Leave allows employees to take up to 12 weeks of paid leave while their newborn is receiving intensive care in the NICU. Neonatal Care Leave is in addition to the 12 weeks of paid FAMLI leave that employees may be eligible to receive for other covered circumstances (e.g., the serious health condition of the employee or their covered family member, baby bonding, making arrangements for a family member's military deployment, or for matters related to domestic violence, stalking, or sexual assault or abuse).

Currently, the maximum weekly FAMLI benefit is $1,381.45. The weekly benefit is adjusted on or about July 1 of each year when Colorado establishes its state average weekly wage. Colorado also adopted amendments to the rules governing the administration and use of FAMLI including clarification on what constitutes care for a family member and the coordination of leave and benefits.

Relatedly, on December 19, 2025, the IRS issued Revenue Ruling 2025-4, which extended the grace period for states and employers to comply with certain tax and income reporting obligations for paid family and medical leave benefits. This means that the requirement to include FAMLI paid leave benefits in an employee's gross income for purposes of federal employment tax purposes will not take effect until the 2027 tax year.

Amendments to the Colorado Anti-Discrimination Act (CADA)

• The Kelly Loving Act (HB 25-1312): Although CADA already contained protections for gender expression, the Kelly Loving Act amended CADA to clarify that a person's chosen name and how they choose to be addressed are protected forms of gender expression under CADA, provided the chosen name does not contain offensive language and the individual is not asking to use the name for frivolous purposes.
  
• Expanded Remedies for Public Accommodation Disability Discrimination (HB 25-1239): As amended, plaintiffs can seek a court order requiring compliance with CADA's provisions, attorney fees and costs, and either: (i) recovery of actual monetary damages and damages for noneconomic loss or injury of up to $50,0000; or (ii) a statutory fine of $50,0000 for each violation. Defendants that do not engage in knowing, intentional, or reckless violations can receive a 50% reduction of the non-economic damages cap if the violation is corrected within 30 days after the complaint is filed. If a defendant operates in good faith but is not able correct the violation within this time period, they may be provided three additional 30-day periods to correct the violation.

More Limitations on the Enforceability of Restrictive Covenants

In Colorado, restrictive covenants are generally void unless they meet certain statutory exceptions. Colorado's restrictive covenant statute was amended in 2022 to further narrow these exceptions, add income threshold requirements, stand-alone notice requirements, procedural protections for employees like Colorado choice of law, and increased penalties against employers who entered into unenforceable or non-compliant agreements. Additional amendments which took effect August 6, 2025 as well as 2026 income threshold adjustments further limit the use of restrictive covenants in Colorado.

• Higher Income Thresholds: The income threshold for an employee to be subject to a non-compete or customer non-solicitation agreement is adjusted for inflation each year. Beginning January 1, 2026, the income threshold for non-compete agreements has increased from $127,091 to $130,014, and for customer non-solicitation agreements, the income threshold has increased from $76,254.60 to $78,008.40.
  
• Restrictive Covenants No Longer Enforceable Against Healthcare Providers: SB25-083, which went into effect on August 6, 2025, effectively voids non-compete and non-solicitation agreements for physicians, physician assistants, advanced practice registered nurses, certified midwives, and dentists, regardless of income level. The law is not retroactive, but applies to any new employment contract or renewal entered into since the law went into effect. Liquidated damages related to the termination of physician employment agreements or that require the payment of damages related to competition also are no longer enforceable.
  
• Patient Communications: SB25-083 also provides a departing healthcare provider cannot be prohibited or restricted from disclosing to a patient (to whom they were providing consultation or treatment before their departure) information regarding their continuing practice of medicine, their new professional contact information, or the patient's right to choose a health care provider.
  
• Protections for Minority Owners: In addition to voiding non-compete agreements for healthcare providers, SB25-083 provides clarification regarding restrictive covenants entered into in connection with the purchase or sale of a business, which are generally enforceable under Colorado law. Certain individuals who own minority ownership shares in businesses—defined as those who receive their equity as consideration for services—can only be subject to restrictive covenants for a limited time period after the purchase or sale of a business. The law sets forth a formula to calculate this time period that considers the total consideration the individual will receive from the sale, as well as their average annual compensation. This portion of the law does not explicitly exclude healthcare workers.

Increases to Minimum Wage and Salary Levels for Overtime Exemptions

• Statewide Minimum Wage: Beginning January 1, 2026, the statewide minimum wage in Colorado increased to $15.16/hour. Local minimum wages also saw increases to minimum wages in Denver ($19.29/hour), Edgewater ($18.17/hour), and Boulder ($16.82/hour).
  
• Local Minimum Wage (LMW) for Tipped Employees: Under HB25-1208, localities, such as Denver, that set a higher LMW than the Colorado statewide minimum wage must allow a tip credit equal to or greater than what the Colorado Constitution requires for the statewide minimum wage (currently $3.02 per hour). The tip credit can only be used in situations where state law provides for a tip credit and the tip credit may not bring direct wages (without tips) lower than Colorado's statewide tipped minimum wage which is $12.14 beginning January 1, 2026. So far, the City of Edgewater is the only local government to establish a greater tip credit.
  
• Increased Salary Levels for Overtime Exemptions: In Colorado, salary levels for certain exemptions from overtime are adjusted annually. Effective January 1, 2026: the salary level required for the Executive, Administrative, and Professional exemptions from overtime increased from $1,086.25/week ($56,485 annual-equivalent) to $1,111.23/week ($57,784 annual-equivalent); the salary level required for the Highly Compensated Employee (HCE) exemption increased from $127,091 to $130,014.

Employers should review their pay practices, payroll system administration, and exemption classifications to ensure they comply with these new wage or salary levels.

Biometric Protections Added to Colorado Privacy Act

Effective July 1, 2025, employers who collect the biometric information from their employees (e.g., fingerprint, voiceprint, retinal scan) must provide the employees with notice of, and obtain their consent to, the collection and processing of biometric identifiers. Consent to the collection of biometric identifiers can be made a condition of employment in certain circumstances, such as permitting access to secure physical locations or electronic applications, performing background checks, timekeeping, enhancing workplace safety, and improving public safety during emergencies.

Employers that collect the biometric information of their employees should review their notice, consent, and data protection practices for compliance.

Coming Soon in 2026

Implementation of Postponed AI Law

Colorado delayed the implementation of a sweeping AI law that was passed in Colorado in 2024 (SB24-205). Previously set to go into effect in February 2026, the law's implementation is delayed until at least the end of June 2026, to allow lawmakers more time to amend and clarify the law's provisions. Once it goes into effect, Colorado's AI law is likely to impose significant compliance obligations on both developers and deployers of "high-risk" AI systems, including AI systems that make or significantly influence consequential employment decisions. Employers who use, or are considering using, AI in their employment processes should evaluate their AI risk management practices to ensure compliance with the forthcoming law.

Amendments to Agricultural Labor Condition Rules

Effective February 1, 2026, Colorado's heat illness and injury protection rules for agricultural employers were amended to clarify:

• covered employers must monitor heat conditions throughout the day;
  
• how an employer must monitor current temperature;
  
• indoor, temperature-controlled spaces are an acceptable alternative to shade; and
  
• the acclimatization period applies to the first four days when the temperature is over 80 degrees Fahrenheit.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.