Colorado Exempt Salary Threshold 2025

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The Colorado exempt salary threshold is set to increase to $61,000 in 2025. This is a significant increase from the current threshold of $59,260. The increase is intended to keep pace with the rising cost of living in Colorado. The new threshold will also help to ensure that employees are paid a fair wage for their work. The Colorado Department of Labor and Employment (CDLE) is responsible for enforcing the exempt salary threshold. Employers who fail to comply with the new threshold may be subject to fines and other penalties.

In addition to the increase in the exempt salary threshold, the CDLE has also made changes to the overtime rules for exempt employees. Under the new rules, exempt employees will be eligible for overtime pay if they work more than 40 hours in a week. This is a change from the previous rule, which allowed employers to require exempt employees to work up to 50 hours per week without paying overtime.

The changes to the exempt salary threshold and overtime rules are expected to have a significant impact on businesses in Colorado. Businesses should review their pay practices to ensure that they are in compliance with the new rules. Employees who are not sure if they are exempt from overtime should contact the CDLE for more information.

Colorado’s Escalating Exempt Salary Threshold: A Comprehensive Overview

Colorado’s Growing Exempt Salary Threshold

Colorado has enacted a law that will gradually increase the salary threshold for employees to be classified as exempt from overtime pay. This move is part of a growing trend across the United States to ensure that salaried employees are fairly compensated for their work. The new law will go into effect in 2025 and will increase the salary threshold by 50% over the current level. This means that by 2025, salaried employees must earn at least $60,000 per year in order to be classified as exempt from overtime pay.

The new law will have a significant impact on employers in Colorado. Although employers with a small number of employees may not be as affected, businesses that employ a large number of salaried individuals will need to carefully review their compensation structures to ensure compliance with the new law. Failure to do so could result in significant back pay and penalties for violating overtime laws.

To help employers prepare for the changes, the Colorado Department of Labor and Employment has provided the following table outlining the new salary thresholds:

Year	Salary Threshold
2025	$60,000
2026	$63,000
2027	$66,000
2028	$68,600

Factors Influencing the Colorado Exempt Salary Threshold

1. Federal Fair Labor Standards Act (FLSA)

The FLSA establishes minimum wage, overtime pay, and other employment standards. It also defines which employees are exempt from overtime pay, including those who meet the “salary basis” test. To be considered exempt under the FLSA, employees must earn a salary that is at least $684 per week ($35,568 per year). Colorado’s exempt salary threshold must be at least as high as the federal level.

2. Colorado Overtime and Minimum Wage Order No. 38 (OWMO 38)

OWMO 38 sets the overtime and minimum wage rates for Colorado employees. It also includes provisions for exempt employees. In 2023, the minimum hourly wage in Colorado is $13.65. The exempt salary threshold under OWMO 38 is currently set at $1,160 per week ($60,320 per year). However, this threshold is scheduled to increase in 2025, as shown in the table below:

Year	Exempt Salary Threshold
2025	$1,383 per week ($71,636 per year)

3. Cost of Living

The cost of living in Colorado has a significant impact on the exempt salary threshold. The higher the cost of living, the higher the salary that is required to maintain a reasonable standard of living. The Colorado Department of Labor and Employment (CDLE) considers the cost of living when setting the exempt salary threshold.

Implications of the Increased Threshold for Employers and Employees

Increased Labor Costs

Employers may face higher labor costs as more employees qualify for overtime pay under the increased threshold. This could strain budgets and reduce profitability, especially for businesses with a large workforce.

Need for Clear Exemptions

Employers must carefully define and document which employees qualify as exempt under the revised threshold. Failure to do so could lead to legal disputes and costly penalties if employees are misclassified.

Reduced Work Flexibility

The higher threshold may limit employers’ ability to offer flexible work arrangements to exempt employees. Employers may be less willing to allow overtime for exempt employees who are close to the threshold, as it could push them into non-exempt status. This could reduce employees’ options for work-life balance.

Compliance Strategies for Colorado Businesses

1. Determine Employee Eligibility

Verify if employees meet the duties test and salary threshold to qualify for exempt status.

2. Establish Clear Job Descriptions

Document job duties and responsibilities to demonstrate the employee’s exempt nature.

3. Set Competitive Salary Levels

Ensure salaries meet or exceed the state-mandated threshold to maintain compliance.

4. Utilize a Salary-Based Exemption

Consider incorporating a salary-based exemption into employment agreements or company policies, specifying the required salary level for exempt status. This provides a clear and easily verifiable way to determine employee eligibility.

To ensure compliance, employers should implement the following best practices:

Document the salary level and job duties in writing.
Regularly review job descriptions to verify that they still meet the criteria for exempt status.
Conduct internal audits to monitor compliance and identify any potential issues.

By adhering to these best practices, businesses can minimize the risk of misclassification and ensure compliance with the Colorado exempt salary threshold.

The Economic Impact of the Revised Threshold

The revised exempt salary threshold in Colorado will have a number of economic impacts, including:

Increased Wages for Low-Income Workers

The new threshold will ensure that more low-income workers are paid overtime, which will increase their wages. This will help to boost the economy and reduce income inequality.

Reduced Costs for Businesses

The new threshold will also reduce costs for businesses by eliminating the need to track overtime for workers who are now exempt. This will save businesses time and money.

Increased Productivity

The new threshold will also lead to increased productivity by ensuring that workers are compensated fairly for their time. This will motivate workers to work harder and produce more.

Reduced Turnover

The new threshold will also help to reduce turnover by ensuring that workers are treated fairly. This will save businesses the cost of recruiting and training new employees.

Impact on Specific Industries

The impact of the revised threshold will vary depending on the industry. Some industries, such as retail and hospitality, will be more affected than others. The following table shows the estimated impact on different industries:

Industry	Impact
Retail	Moderate
Hospitality	High
Manufacturing	Low
Finance	Low

Legal Considerations for Employers

I. Understanding the Threshold

The Colorado exempt salary threshold is the minimum salary that an employee must earn to qualify for overtime pay exemption. In 2025, this threshold will increase to $875 per week or $45,500 annually.

II. Exemptions from Overtime

Certain employees are exempt from overtime pay requirements. These include:

* Executives
* Administrators
* Professionals
* Outside sales employees

III. The Duties Test

To qualify as exempt, an employee’s duties must meet the following criteria:

* Primary Duty Test: The employee’s primary duty must be exempt work.
* 20% Rule: No more than 20% of the employee’s time may be spent on non-exempt work.

IV. Misclassification Risks

Misclassifying employees as exempt can lead to significant legal penalties and back pay liability for employers. It is crucial to carefully assess employee duties and consult with legal counsel if necessary.

V. Recordkeeping Requirements

Employers are required to keep records that document employee hours worked and overtime pay calculations. These records must be maintained for at least three years.

VI. Posting Requirements

Employers must prominently display a notice in the workplace that outlines the following information:

Item	Description
Current exempt salary threshold	$45,500
Overtime pay rate	1.5 times the employee’s regular rate
Procedure for reporting overtime worked	As outlined by the employer

Enforcement and Penalties for Threshold Violations

Compliance Audits

The Colorado Department of Labor and Employment (CDLE) may conduct random audits to ensure compliance with the exempt salary threshold law.

Employee Complaints

Employees who believe they are misclassified as exempt can file a complaint with the CDLE.

Penalties

Violations of the exempt salary threshold law may result in the following penalties:

* Back Wages: The employee must be paid back wages for the hours worked at a rate that meets or exceeds the threshold.
* Overtime Pay: Employees who were classified as exempt may be entitled to unpaid overtime compensation.
* Fines: The CDLE may impose fines of up to $500 per employee for each violation.
* Injunction: The CDLE may seek an injunction to prevent the employer from further violating the law.

Penalties for Repeated or Willful Violations

* Increased Fines: Fines can increase to up to $1,000 per employee for each violation.
* Criminal Charges: Willful or repeated violations may result in criminal charges.

Employer Defenses

Employers can defend against threshold violations by presenting evidence that:

* The employee met the duties test for the exempt classification.
* The employee was properly compensated and had the opportunity to earn overtime pay.
* The employer made a good faith effort to comply with the law.

Future Projections and Potential Amendments

The exempt salary threshold in Colorado is set to continue rising in the coming years. The following table outlines the projected thresholds for 2023-2025:

Year	Projected Threshold
2023	$58,316
2024	$61,746
2025	$65,400

8. Potential Amendments

There are several potential amendments to the exempt salary threshold in Colorado that could impact the future of the law. One amendment currently under consideration would tie the threshold to inflation, ensuring that it keeps pace with the cost of living. Another amendment would exempt certain professions or industries from the threshold, such as teachers or law enforcement officers. It is likely that the Colorado legislature will continue to consider amendments to the exempt salary threshold in the coming years.

Best Practices for Salary Administration

Establish Clear Job Descriptions and Performance Expectations

Define the roles, duties, and responsibilities for each position, ensuring that the requirements align with the anticipated compensation range.

Conduct Thorough Market Research

Analyze industry benchmarks, comparable data, and local market trends to ensure that salaries are competitive and aligned with industry standards.

Regularly Review and Update Salaries

Monitor market conditions and employee performance regularly to ensure that salaries remain competitive and reflect changes in job responsibilities.

Consider the Total Compensation Package

In addition to base salary, consider other forms of compensation such as bonuses, stock options, and benefits to create a comprehensive and competitive package.

Use a Structured Salary Range

Establish a range of salaries for each position based on job level, performance, and market data, allowing for flexibility and fairness in compensation decisions.

Maintain Pay Secrecy

Protect employee privacy by keeping salary information confidential, promoting trust and preventing salary disparities that could lead to resentment.

Provide Clear and Consistent Compensation Communication

Communicate salary policies and expectations openly and transparently to employees, ensuring that they understand the basis for compensation decisions.

Promote a Culture of Fairness and Transparency

Create a work environment where employees feel valued and fairly compensated, fostering a sense of trust and motivation.

Continuously Evaluate and Improve Salary Practices

Conduct regular audits and evaluations of salary administration practices to identify areas for improvement and ensure compliance with relevant laws and regulations.

Impact on Colorado’s Labor Market

Increase in Exempt Employee Salaries

The new salary threshold will increase the salaries of exempt employees, potentially leading to a reduction in wage disparities between exempt and non-exempt employees.

Shift in Hiring Practices

Employers may reconsider their hiring practices to avoid misclassifying employees as exempt and potentially facing penalties. Some may opt to hire more non-exempt employees or adjust job responsibilities to meet the new threshold.

Impact on Small Businesses

Small businesses with limited resources may face challenges in adjusting to the new threshold. They may need to re-evaluate compensation structures or reconsider the number of exempt employees they hire.

Compliance Costs

Employers will incur additional costs associated with compliance with the new regulation, such as auditing payroll records, updating employee classifications, and training supervisors.

Increased Enforcement

The Colorado Department of Labor and Employment (CDLE) is expected to increase enforcement efforts to ensure compliance with the new threshold. Employers should proactively review their employee classifications to avoid potential penalties.

Impact on Unionized Workers

The new threshold may have implications for unionized workers whose collective bargaining agreements specify exempt status. Unions and employers may need to revisit these agreements to ensure alignment with the revised regulation.

Impact on Overtime Pay

The increase in exempt employee salaries could reduce the number of hours worked overtime, potentially saving employers on overtime pay expenses.

Economic Impact

The new salary threshold may have a minor impact on Colorado’s overall economy. Some businesses may experience increased labor costs, while others may benefit from reduced overtime pay expenses.

Training and Education

Employers should provide training to supervisors and HR professionals to ensure understanding of the revised exempt salary threshold and its implications.

Ongoing Monitoring

The CDLE will continue to monitor the implementation of the new threshold and may make adjustments as needed to ensure its effectiveness and fairness.