Colorado Overtime Laws: What Every Employer Needs to Know

Colorado overtime laws require employers to take a careful approach to compliance. With state-specific rules layered on top of federal regulations, employers must be precise about how overtime is tracked and paid. Missteps can lead to wage disputes or penalties, making it important to know exactly where Colorado's rules differ.

Colorado goes beyond federal overtime standards, adding unique protections for workers through the Colorado Overtime and Minimum Pay Standards (COMPS) Order. These regulations outline when employees qualify for overtime pay based on both weekly and daily hours worked. Employers must ensure calculations align with these requirements to avoid noncompliance.

Understanding overtime laws in Colorado isn't just about knowing the basics; it's about grasping the details that set the state apart. Here's an explanation of Colorado's overtime rules, including the core requirements under federal law, daily and weekly thresholds for overtime, and specifics from the COMPS Order.

Colorado Overtime Requirements

Federal law under the Fair Labor Standards Act (FLSA) requires overtime pay at one-and-a-half times an employee’s regular pay rate for hours worked over 40 in a single workweek. Colorado adopts this rule but adds significant additional protections under state law.

The COMPS Order specifies that overtime pay also applies after 12 hours worked in a single workday or after 12 consecutive hours of work, even if those hours span two calendar days. Employers must pay the higher amount if employees meet both daily and weekly thresholds for overtime in the same pay period.

Colorado law also requires employers to include holiday incentive pay in the regular rate of pay when calculating overtime for nonexempt employees. This differs from federal law, which excludes certain types of holiday pay. In Colorado, incentive pay for hours worked on holidays must be factored into overtime calculations, ensuring workers receive accurate compensation.

Eligibility and Exemptions

Colorado overtime laws require employers to carefully determine which employees are non-exempt and eligible for overtime pay versus exempt and not entitled to overtime. The classification depends on specific job duties and salary thresholds outlined under both Colorado law and the FLSA. Missteps in classification can lead to costly compliance issues, so clarity is key.

Non-Exempt vs. Exempt Employees

Non-non-exempt employees are covered by overtime laws and must receive overtime pay for hours worked beyond thresholds set by Colorado and federal rules. These employees are often hourly workers or salaried employees who don't meet exemption criteria.

Exempt employees, on the other hand, are not eligible for overtime. Classification as exempt requires meeting strict guidelines, including minimum salary requirements and specific job duties. Job titles alone do not determine exemption.

Salary Thresholds for Exemption

To qualify as exempt in Colorado, employees must earn at least $55,000 annually in 2025. This threshold adjusts annually based on inflation. For federal exemptions under the FLSA, employees must earn at least $684 per week, which equals $35,568 annually. Employees earning less than these amounts automatically qualify as non-exempt and must receive overtime pay.

Common Exempt Categories

Exempt employees typically fall into one of three categories: executive, administrative, or professional. Each category has clear definitions:

Executive: Must manage a department or the entire business, oversee at least two employees, and have influence over hiring or firing decisions.
Administrative: Must handle office or non-manual work directly tied to management or general business operations and use independent judgment on significant matters.
Professional: Must apply advanced knowledge in a specialized field, often requiring a degree or extensive training.

Colorado's rules align with federal categories but include unique distinctions. For instance, the highly compensated employee exemption under the FLSA, which applies to employees earning $107,432 annually and performing at least one exempt duty, does not exist under Colorado law. Additionally, some industries, such as ski resorts or private in-home care, have specific exemptions in Colorado.

Employers must review each employee's job duties and salary carefully to avoid misclassification. Errors in determining exemption status can lead to disputes, penalties, and back pay liability.

Holiday Incentive Pay vs. Holiday Pay

The Colorado Supreme Court recently issued a decision that reshaped how employers calculate overtime for holiday-related compensation. The ruling focused on the distinction between holiday incentive pay and holiday pay, creating clear guidelines for businesses managing overtime obligations.

Holiday incentive pay refers to additional wages earned by employees who work during a holiday. For example, a retail worker earning time-and-a-half to cover a holiday shift would fall under this category. This compensation directly rewards employees for working hours that many others have off.

Holiday pay, in contrast, applies to wages paid for time off on designated holidays, like Christmas or Independence Day. Employees typically receive their regular daily pay without performing any work. This type of pay does not enter into overtime calculations.

The court determined that holiday incentive pay must be included in the regular rate of pay when calculating overtime for nonexempt employees. This adjustment ensures workers receive the correct overtime rate based on all compensation earned during the workweek. For instance, if an employee earns additional holiday incentive pay on top of their hourly rate, the employer must account for that increased total when determining overtime compensation.

Failing to include holiday incentive pay in overtime calculations can lead to compliance violations, back pay liabilities, and potential legal disputes. Employers should carefully track how incentive pay is issued during holiday shifts and ensure payroll systems reflect the updated requirements.

Break and Meal Period Rules

Colorado labor law sets clear requirements for meal and rest periods to protect employee well-being. Employers must provide structured breaks based on the length of a worker's shift, with specific guidelines for how and when these breaks should occur. Missteps can lead to compliance issues, so understanding the rules is key.

Meal Periods

Employees working shifts longer than five hours are entitled to a 30-minute unpaid meal break. During this time, they must be completely relieved of work duties. If an employee is required to stay on-site or perform any tasks—such as monitoring equipment or answering calls—the meal period must be paid.

Employers must actively communicate this policy and ensure schedules allow for uninterrupted breaks. For roles that don't permit full relief from duties, like certain healthcare or emergency response positions, employers should adjust pay practices to reflect the work performed during meal periods.

Rest Breaks

Colorado requires a paid 10-minute rest break for every four hours worked or the majority of a four-hour period. These breaks should fall near the middle of the work period whenever possible.

Here's a breakdown:

4-hour shifts: 1 paid 10-minute break.
8-hour shifts: 2 paid 10-minute breaks.
12-hour shifts: 3 paid 10-minute breaks.

Rest breaks cannot be used to shorten a shift or skipped altogether, even if an employee agrees. Employers must create schedules that include these breaks and encourage employees to take them as intended.

Industry-Specific Rules and Exemptions

Some industries or roles may follow modified break schedules due to operational demands. For example, agricultural workers or employees in continuous operations may not adhere strictly to the standard structure. Even with exceptions, employers must ensure employees receive reasonable opportunities for rest.

To stay compliant, employers should review industry-specific policies, document break schedules, and make sure employees understand their rights.

Paid Sick Leave and Wage Protections

Colorado employees have guaranteed rights to paid sick leave under the Colorado Healthy Families and Workplaces Act (HFWA). This law requires employers to provide sick leave that accrues steadily based on hours worked, ensuring workers can address personal or family health needs without losing income.

Accrual and Usage

Employees earn one hour of paid sick leave for every 30 hours worked, with an annual cap of 48 hours. Employers must track accrual accurately and make the leave available as soon as it's earned. Both full-time and part-time employees qualify for this benefit, and any unused hours can roll over into the next year. However, employers can limit the total annual usage to 48 hours unless their internal policies are more generous.

Paid sick leave can be used for specific reasons, including:

Personal health: Caring for an illness, injury, or attending medical appointments.
Family care: Supporting a family member with health concerns or medical needs.
Public health emergencies: Addressing safety or health needs stemming from a declared emergency.

Employees must inform employers of their need for leave as soon as possible, unless an emergency prevents advance notice.

Right to Return

Workers using paid sick leave are legally protected against retaliation or negative actions from their employer. Employers cannot reduce pay, alter job duties, or punish employees for exercising their right to sick leave under the HFWA.

Upon returning to work, employees must be reinstated to the same position with the same pay rate and benefits they had before taking leave. This ensures workers can prioritize their health and family without fear of job insecurity.

Employers should maintain clear records of sick leave accrual and usage to stay compliant. Missteps, whether intentional or unintentional, can lead to penalties or disputes.

Recordkeeping Duties

Colorado overtime laws require precise recordkeeping practices to stay compliant with both state and federal regulations. Employers must document specific details about employee hours and wages to avoid compliance issues or disputes. Incomplete or inaccurate records can lead to penalties, making proper documentation a priority for every organization.

Records Employers Must Maintain

Employers are legally required to track and retain detailed records of employee work and pay information. The most important records to maintain include:

Start and end times: Record exact clock-in and clock-out times for each shift, ensuring compliance with rules on rounding practices.
Daily and weekly hours worked: Document total hours worked each day and week, including when overtime hours begin.
Pay rates and wages: Maintain records of regular pay rates, overtime pay rates, gross wages, and net pay.
Deductions: Clearly track all payroll deductions, such as taxes, benefits, or garnishments.
Breaks: Record meal and rest breaks, particularly unpaid meal periods, to verify compliance with Colorado labor laws.

Colorado law requires employers to keep these records for at least three years. They must also remain accessible for employee review or regulatory audits.

Simplifying Recordkeeping

Tracking hours and wages manually can result in errors and wasted time. Using an integrated workforce management system automates time tracking, payroll calculations, and reporting. These systems reduce errors by capturing clock-in and clock-out data in real time and automatically calculating overtime based on Colorado's specific thresholds.

Automated systems also simplify record storage by generating detailed reports on hours worked, pay rates, and deductions, ensuring compliance during audits or disputes. Employers who implement streamlined processes often save time and improve accuracy while staying aligned with state and federal requirements.

Overtime Calculation Steps

Calculating overtime pay in Colorado involves clear steps to ensure compliance with state-specific overtime requirements. Each employee type—hourly, salaried non-exempt, tipped, and commissioned—requires a tailored approach. Employers must include all eligible earnings, such as shift differentials or performance-based bonuses, when determining the regular rate of pay.

Hourly Employees

Hourly employees' overtime pay is based on their regular hourly rate, which includes any additional compensation tied to their work.

Step 1: Total all earnings for the workweek, including base wages, shift differentials, and eligible bonuses.
Step 2: Divide total earnings by hours worked to verify the regular hourly rate.
Step 3: Multiply the regular rate by 1.5 to calculate the overtime rate.
Step 4: Multiply the overtime rate by the number of overtime hours worked.

For example, if an employee earns $20 per hour and works 45 hours in a week, the calculation is:

Regular pay: $20 x 40 hours = $800.
Overtime rate: $20 x 1.5 = $30.
Overtime pay: $30 x 5 hours = $150.
Total pay: $800 + $150 = $950.

Salaried Non-Exempt Employees

For salaried non-exempt employees, the regular hourly rate is determined by dividing the weekly salary by the expected hours worked.

Step 1: Divide the employee's weekly salary by 40 (or the standard full-time hours).
Step 2: Multiply the result by 1.5 to find the overtime rate.
Step 3: Multiply the overtime rate by overtime hours worked.

For instance, if a non-exempt employee earns $900 weekly and works 50 hours, the calculation is:

Regular hourly rate: $900 ÷ 40 hours = $22.50.
Overtime rate: $22.50 x 1.5 = $33.75.
Overtime pay: $33.75 x 10 hours = $337.50.
Total pay: $900 + $337.50 = $1,237.50.

Tipped Employees

Overtime for tipped employees requires combining the hourly cash wage with tips earned to ensure the total meets Colorado's minimum wage standards.

Step 1: Add the hourly cash wage and average tips per hour.
Step 2: Confirm the total equals or exceeds the state's minimum wage.
Step 3: Multiply the combined rate by 1.5 to determine the overtime rate.
Step 4: Multiply the overtime rate by overtime hours worked.

For example, if a tipped employee earns $12 per hour in cash wages, averages $10 in tips per hour, and works 45 hours:

Regular hourly rate: $12 + $10 = $22.
Overtime rate: $22 x 1.5 = $33.
Overtime pay: $33 x 5 hours = $165.
Total pay: (40 hours x $22) + $165 = $1,045.

Commissioned Employees

For commissioned employees, overtime pay includes both base pay and commissions earned during the week.

Step 1: Add base pay and commissions for the week.
Step 2: Divide the total by hours worked to calculate the regular hourly rate.
Step 3: Multiply the regular rate by 1.5 for the overtime rate.
Step 4: Multiply the overtime rate by overtime hours worked.

For example, if a commissioned employee earns $400 in base pay and $600 in commissions over 50 hours:

Total weekly earnings: $400 + $600 = $1,000.
Regular hourly rate: $1,000 ÷ 50 hours = $20.
Overtime rate: $20 x 1.5 = $30.
Overtime pay: $30 x 10 hours = $300.
Total pay: $1,000 + $300 = $1,300.

Including Bonuses and Shift Differentials

Colorado employers must include all eligible forms of additional compensation, such as shift differentials and production bonuses, in the regular rate before calculating overtime. Excluding these earnings can lead to compliance violations. Tracking all compensation accurately ensures employees receive the correct rate for overtime hours worked.

Penalties and Enforcement

Colorado overtime violations come with steep financial consequences. Employers can face fines of up to $1,000 per employee for every day the violation continues. These fines add up quickly, especially for businesses with larger teams.

Beyond fines, employers are also responsible for paying back wages to employees who were not compensated correctly for overtime. Back wages must be calculated at the overtime rate of 1.5 times the employee's regular pay rate. On top of that, Colorado law allows employees to recover liquidated damages equal to the amount of unpaid wages. This effectively doubles the financial liability for employers.

Employers may also be required to pay the affected employee's attorney fees. Legal representation costs can significantly increase the expense of noncompliance, turning a simple oversight into a costly mistake.

Colorado provides a two-year statute of limitations for employees to file claims related to unpaid overtime. However, this window extends to three years if the violation was intentional. Willful violations occur when employers knowingly fail to comply with overtime laws or ignore compliance issues once identified.

The combination of daily fines, back wages, damages, and legal fees creates a significant incentive for businesses to stay compliant.

Steps to Ensure Compliance

Employers in Colorado must take deliberate actions to comply with overtime laws. With unique state regulations layered on top of federal requirements, maintaining compliance requires more than just awareness. Regular reviews, accurate tracking, and well-informed managers can help prevent costly mistakes.

Audit Employee Classifications

Reviewing employee classifications on a regular basis reduces the risk of misclassification. Missteps in determining whether an employee is exempt or non-exempt can lead to overtime violations.

Examine job descriptions against actual job responsibilities. Ensure they align with exemption criteria under state and federal regulations.
Confirm that exempt employees meet Colorado's salary thresholds, which change annually.
Keep detailed documentation of classification decisions, including how job duties and salary levels were assessed.

Plan to conduct audits at least once a year, or more frequently if roles or laws change.

Track Hours and Breaks with Precision

Accurate time records are a foundational part of compliance. Colorado's overtime laws and break requirements leave little room for error.

Record exact start and end times for every shift. Avoid rounding hours, as it can create discrepancies in overtime calculations.
Monitor daily and weekly hours worked. Pay close attention to employees approaching the 12-hour daily threshold or 40-hour weekly limit.
Maintain records of meal and rest breaks. If an employee misses or shortens a break, adjust pay accordingly and document the reason.

Consistency in time tracking ensures accurate payroll and reduces compliance risks.

Train Managers to Enforce Breaks

Supervisors are often responsible for ensuring employees take breaks, but they can't do this effectively without proper training.

Provide clear instructions on Colorado's meal and rest break requirements. For example, managers should understand that employees working more than five hours are entitled to a 30-minute meal period and must take a 10-minute paid rest break for every four hours worked.
Emphasize the importance of scheduling breaks at appropriate times. Breaks should occur during the middle of a work period whenever possible.
Teach managers how to respond when operational demands affect breaks. For instance, if an employee needs to work through a meal period, managers should adjust pay or reschedule the break later in the shift.

Annual training keeps managers informed and helps reinforce compliance practices.

Use HR Software to Streamline Tracking

Manual processes can lead to errors and inefficiencies. Automating time tracking and payroll calculations simplifies compliance with Colorado's unique overtime rules.

Implement a system that records clock-in, clock-out, and break times in real time. This ensures accurate data for payroll and compliance reporting.
Set automatic alerts to notify managers when employees approach overtime thresholds.
Configure payroll systems to calculate overtime pay correctly, including holiday incentive pay and shift differentials.

By integrating time tracking and payroll, employers can improve accuracy while reducing the administrative burden of compliance.

Common Questions from Employers

Colorado overtime laws can be complex, especially when balancing state-specific requirements with federal rules. Employers often encounter recurring questions about daily thresholds, break entitlements, and precise overtime calculations. Below are straightforward explanations to help clarify your responsibilities.

Is overtime after 8 hours or 40 hours in Colorado?

Overtime in Colorado applies differently than under federal law. While federal regulations focus solely on exceeding 40 hours in a workweek, Colorado law imposes additional daily and consecutive-hour thresholds. Under the COMPS Order, employees qualify for overtime pay in these situations:

Working more than 40 hours in a single workweek.
Exceeding 12 hours in one workday.
Surpassing 12 consecutive hours, even if the hours span two days.

When an employee qualifies for overtime under multiple thresholds, employers must choose the calculation that results in the highest pay. For example, if an employee works 13 hours in a day and also exceeds 40 hours in a week, overtime would be calculated using the scenario that benefits the employee most.

How many hours can employees work in a day under Colorado law?

State law does not cap the number of hours an employee can work in a day. However, employers must pay overtime wages for hours that exceed the 12-hour daily limit or the 12 consecutive-hour threshold. Whether employees work 14, 16, or more hours, the law focuses on proper overtime pay rather than restricting hours worked.

Employers should monitor long shifts carefully to maintain compliance and ensure accurate overtime pay. Proper scheduling can also help avoid unnecessary overtime costs while meeting operational needs.

How many breaks are required in a 12-hour shift?

A 12-hour shift in Colorado requires a specific number of breaks to comply with state labor laws. Employees must receive:

Three paid 10-minute rest breaks: One break is required for every four hours worked or the majority of four hours.
One unpaid 30-minute meal break: This applies once a shift exceeds five total hours.

Rest breaks should be distributed evenly throughout the shift. For example, employees working a 12-hour shift would typically take one rest break in the early part of the shift, another near the midpoint, and the third closer to the end.

Meal breaks must allow employees to step away from all job responsibilities. If employees remain on duty during the meal break, employers must pay for that time. Industries with unique demands, such as emergency services, may have adjusted break requirements, but deviations must be documented.

How do employers calculate overtime pay in Colorado?

Calculating overtime pay accurately requires several steps. The key is determining the employee's regular rate of pay, which includes all eligible earnings such as base wages, bonuses, and shift differentials.

Step 1: Total all eligible earnings for the workweek, including bonuses and additional pay.
Step 2: Divide total earnings by the number of hours worked to find the regular hourly rate.
Step 3: Multiply the regular hourly rate by 1.5 to calculate the overtime rate.
Step 4: Multiply the overtime rate by the number of overtime hours worked.

For instance, an hourly employee earning $20 per hour who works 45 hours in a week would have:

$20 x 40 hours = $800 in regular pay.
$20 x 1.5 = $30 overtime rate.
$30 x 5 hours = $150 in overtime pay.
Total pay: $800 + $150 = $950.

Employers must also include holiday incentive pay and other eligible compensation in the regular rate calculation. Excluding these components can result in underpayments and potential compliance violations.

Navigating Colorado's overtime laws requires precision and diligence to avoid costly missteps. We're here to help you streamline compliance and protect your business from potential violations. Book a demo today to see how our integrated HR solutions can simplify overtime management and keep you aligned with Colorado's unique requirements.