Written by Stephen E. Baumann II , Hannah J. Fitzgerald and Anna Ward From Holland & Knight LLP on June 20, 2025
Highlights
- Summer is always a key compliance time for Colorado employers, as new employment laws become effective each August.
- During its 2025 General Session, the Colorado General Assembly enacted several new laws impacting employers, including laws governing wage and hour enforcement, restrictive covenant agreements, family medical leave, transgender rights and immigrant protections.
- This Holland & Knight alert provides a brief summary of these laws that are set to go into effect on Aug. 6, 2025.
Amid tumultuous times in federal labor and employment law in 2025, Colorado’s General Assembly has enacted several key modifications to laws impacting employers with Colorado employees – from wage-and-hour enforcement and restrictive covenant limitations to expanded family leave and transgender and immigration rights. Even for those bills that failed this legislative session – such as the Worker Protection Collective Bargaining Act vetoed by Gov. Jared Polis – others have taken up the cause via ballot initiatives impacting labor that will hit Colorado voters’ ballots in 2026.
A Closer Look at the Key Laws
Since many of these new laws go into effect on Aug. 6, 2025, except as noted below, employers should act now to keep their cool as the stakes heat up for employers.
- House Bill (HB) 25-1001 (Enforcement of Wage and Hour Laws). HB 25-1001 amends the Colorado Wage Claim Act, Section 8-4-101, C.R.S., et seq., in several novel ways, including:
- Cabining the application of the definition of “employer” – which previously permitted expansion to “any person” under Section 203(d) of the Fair Labor Standards Act – to include only those individuals who own or control at least 25 percent of the ownership interests in an employer. The amendment also makes clear that an “employer” does not include a minority owner that demonstrates full delegation of authority to control day-to-day operations.
- Prohibiting employers from payroll deductions reducing an employee’s pay below the minimum wage in the state or locality, which are often higher thresholds than the previous limit of the Fair Labor Standards Act (FLSA) federal minimum wage of $7.25 per hour.
- Permitting the Colorado Department of Labor and Employment (CDLE) to waive employer penalties for late wage payments if the employer paid all claimed wages or compensation within 14 days of being served a claim filed with the CDLE, and the violation is not a second or subsequent violation within a five year period. Previously, the CDLE had assessed penalties against employers when the employer had not paid within 14 days of often informal, internal demands by employees. Now, employers have a 14-day period to “settle” wage claims with the CDLE to potentially avoid penalties.
- Permitting the CDLE to report an employer who violates wage-and-hour law to any government body with the capacity to deny or withdraw the employer’s license, permit or registration.
- Changing litigation processes to be more favorable for employees by providing that courts may no longer award attorney’s fees to employers in wage claim disputes, unless the employee’s action lacks substantial justification, and courts may grant equitable relief for employees to deter future employer violations and unjust enrichment. Previously, employers could recover fees if the employee recovered less than demanded, which would be a deterrent to some wage claims or speculative class action claims.
- Expanding discrimination and retaliation protection beyond employees to contractors and others, including explicitly establishing as protected activity raising concerns in good faith (which was previously not a protected activity).
- Establishing a statutory presumption that a period of 90 days or fewer between protected activity and adverse action carries a presumption of retaliatory intent.
- Establishing that using immigration status to discriminate or retaliate in relation to wage claims is unlawful.
- Allowing emotional distress damages in addition to lost pay for violations.
- Allowing the CDLE to award attorneys’ fees in addition to lost wages.
- Updating penalty amounts for wage claim adjudication and for misclassifying employees:
- In wage claim adjudication, the penalty limit increased to $13,000 for claims filed after July 1, 2026, with inflation adjustments to occur every other year starting in 2028. Beyond monetary penalties, for each violation the CDLE determines is willful, the CDLE director must publish the employer’s name on the CDLE’s website and notify all government bodies with ability to remove the employer’s license if the violation is not remedied within 60 days.
- For the misclassification of employees, the new penalties are $5,000 for willful violations, $10,000 if the violation is not remedied within 60 days, $25,000 for a second willful violation within five years, and $50,000 for second willful violation not remedied within 60 days after the division’s findings. The bill also reduces the waiting period for wage recovery from the Wage Theft Enforcement Fund from six months to 120 days.
- Permitting local governments to enact or enforce laws beyond these amendments, such as the City and County of Denver has done.
- In short, while limiting the scope of individual liability and permitting early resolution after the filing of a wage claim with the CDLE, HB 25-1001 otherwise significantly expands employee rights and remedies.
- Senate Bill (SB) 25-083 (Limitations on Restrictive Employment Agreements). SB 25-083 amends Section 8-2-113, C.R.S., to further limit the enforceability of certain restrictive covenants, by:
- Prohibiting non-competes, including certain patient non-solicitation agreements against “Health-Care Providers,” broadly defined to include physicians practicing medicine (as Section 8-2-113(5), C.R.S., previously did), while also expanding to any professional engaging in the practice of medicine, the practice of advanced practice registered nursing, the practice of certified midwifery and the practice of dentistry. Previously, physicians practicing medicine could not be restricted in their practice of medicine by a non-compete but could be subject to reasonable damages clause for unlawfully competing.
- Prohibiting restrictions on “Health-Care Providers” that limit disclosing to patients certain information before departing the practice, including their new professional contact information, their continuing practice of medicine and the patient’s right to choose a healthcare provider. Previously, the disclosure right was more limited to those treating “rare disorders,” and permitted such disclosure only after termination.
- Clarifying that a “sale of a business” covenant remains enforceable relative to ownership shares in a business that may not involve a direct sale transaction, but limiting scope. Most notably, the provision makes clear that for someone who has a minority ownership share as a result of equity, the duration of the covenant cannot exceed the total consideration received from the sale divided by the average of annualized cash compensation received during the preceding two years of the individual’s tenure. For example, if a minority owner receives $1 million in a sale, but was paid $1 million a year in annualized cash compensation over the prior two years, the covenant must not exceed one year duration under the formula.
- In short, SB 25-083 significantly limits the use of restrictive covenants for “Health-Care Providers” and minority owners in a business.
- SB 25-144 (Change Paid Family Medical Leave Insurance Program). The General Assembly also amended the paid Family and Medical Leave Insurance (FAMLI) Act, Section 8-13.3-505, C.R.S., to extend the duration of leave by an additional 12 weeks for a parent of a child receiving inpatient care in a neonatal intensive care unit if the claim arises on or after Jan. 1, 2026, meaning these individuals would qualify for up to 24 weeks of leave.
- The bill also extends the current premium amount financing the program benefits (0.9 percent of wages per employee) through 2025, setting the 2026 premium amount at lower threshold of 0.88 percent of wages per employee. Finally, the bill instructs the director of the FAMLI Division to balance the insurance’s fund, minimize the volatility of the premium rate and ensure that the premium rate does not exceed 1.2 percent of wages per employee.
- HB 25-1312 (Legal Protections for Transgender Individuals).Effective upon signing on May 16, 2025, HB 25-1312, referred to as the “Kelly Loving Act,” codifies certain legal protections for transgender individuals, including prohibitions against “deadnaming” (using a transgender person’s former name) or “misgendering” (using incorrect pronouns).
- Specifically, the Colorado Anti-Discrimination Act (CADA), Section 24-34-301, C.R.S., and Section 24-34-300.5 to 300.7, C.R.S., is amended to define “chosen name” as “a name that an individual requests to be known as in connection to the individual’s disability, race, creed, color, religion, sex, sexual orientation, gender identity, gender expression, marital status, familial status, national origin, or ancestry, so long as the name does not contain offensive language and the individual is not requesting the name for frivolous purposes.”
- CADA further revises the definition for “gender expression” to include an individual’s “chosen name” and chosen pronouns. Consequently, refusal to use an individual’s chosen name or pronouns may be considered unlawful employment discrimination.
- SB 25-276 (Protect Civil Rights Immigration Status). SB 25-276, effective upon signing on May 23, 2025, creates protections for immigrants and prohibits disclosure of personal information maintained by Colorado state agencies or political subdivisions to federal immigration enforcement officials, including without limitation student visa sponsorship data.
- The new law also permits public schools, childcare centers, colleges, healthcare facilities and libraries to collect only personal identifying information as required by federal and state law, necessary to perform duties or to verify someone’s eligibility for a government-funded program.
- By Sept. 1, 2025, such institutions must also adopt policies concerning the release, consent and protection of personal identifying information of children, students, patients, patrons, parents, relatives and the public.
In addition to the new laws passed during this session, two notable bills were not enacted into law.
- SB 25-074 (Highly Specialized Employment Leave Protection Exemption). SB 25-074 aimed to lessen the job protections for highly specialized employees under FAMLI to protect the ability of businesses to continue to operate when such individuals are on leave.
- As the law stands, when an employee takes FAMLI, their employer must generally hold the employee’s position open and maintain their healthcare benefits.
- SB 25-074 sought to create an exception to this requirement for employers with workforces of 51 percent or more of highly specialized employees. “Highly specialized employees” whose 1) responsibilities are not easily transferable without significant training, 2) require a specific degree, certification or technical qualification, or 3) require a skillset rare and in demand. The purpose was to limit impact to employers. Of course, such workforces would often include healthcare, technology and other key industries.
- SB 25-005 (Worker Protection Collective Bargaining). SB 25-005 aimed to remove the requirement for a second election under the Colorado Labor Peace Act to negotiate union security clauses in collective bargaining agreements, which require employees to join the union or pay dues as a condition of continued employment. Gov. Polis vetoed the bill, meaning the requirement of an additional election to authorize a union security clause remains.
- Labor Ballot Initiatives 39 and 43. Voters concerned with SB 25-005 took their own initiatives:
- In 2026, Colorado voters will vote on Ballot Initiative 39, which would establish Colorado as a “right to work” state and prohibit conditioning employment on becoming a member of a union, paying dues or having dues checkoff clauses. Of course, that would prohibit future legislative attempts such as SB 25-005 to require employees to join a union or pay dues as a condition of employment.
- Also in 2026, Colorado voters will vote on Ballot Initiative 43. Sponsored by labor, Ballot Initiative 43 would require “just cause” to terminate or suspend any employee in the state of Colorado after six months of employment. Outside a unionized workforce, Montana is currently the only other state with such a provision limits “at will” employment. Ballot Initiative 43 would also require written notice of “just cause” and a private right of action for an employee to proceed to court if “just cause” is lacking, with reinstatement, back and front pay, and attorneys’ fees all available to the employee.
In sum, in a very active year of changes to labor and employment compliance at the federal level, Colorado continues to actively legislate employee and employer rights. Before these laws become effective Aug. 6, 2025, for those that have not already become effective, employers should consider proactively revisiting their policies, practices, and employment agreements to prevent future headaches.
