Denver Enacts New Wage Theft Ordinance
January 18, 2023
By: Colin A. Walker
On January 9, 2023, the Denver City Council passed an ordinance amending the Revised Municipal Code to provide new remedies for failure to pay wages. The new ordinance provides that the Denver Auditor may investigate and impose fines of up to $25,000 for an employer’s failure to pay wages, and treble damages. Like many other employment laws, there is a civil action for aggrieved employees, penalties, and a prevailing employee may recover their attorneys’ fees. Retaliation is also prohibited.
However, the law is different from many other employment laws in other respects. It provides for “upstream” liability – liability for those who hire employers who fail to pay their employees – for enforcement actions by the Auditor. For example, if a general contractor hires a subcontractor on a construction project and that subcontractor fails to pay its employees, the general contractor would be liable for the wages and penalties. However, to be liable, the upstream party would have to be “regularly engaged in business or commercial activity,” a limitation intended to protect parties such as homeowners. In addition, the Auditor must attempt to collect the penalties from the employer before collecting from an upstream party.
The penalties are more severe that existing wage claim laws. The new law provides that an aggrieved employee can recover three times the amount of unpaid wages. Under the Colorado Wage Claim Act, the employee can recover two times the unpaid wages or three times if the employee proves the failure to pay was willful. The statute of limitations is also longer: three years under the new ordinance; two years under the Fair Labor Standards Act (FLSA) and Wage Claim Act for non-willful violations and three years for willful violations. Interest on unpaid wages accrues at 12% per annum. There is also a presumption, rebuttable by clear and convincing evidence (a higher standard than most existing laws) that any adverse action against an employee within 90 days of a complaint about a wage claim is retaliation.
Business organizations convinced the City Council to adopt a notice provision similar to the Colorado Wage Claim Act’s. The Auditor is to send the employer or upstream party a written demand for payment of wages. If the employer or upstream party pays the amounts demanded within 14 days of the demand, it is not liable for wages or penalties. This provides the potential defendant with a “safe harbor” and an incentive to pay the employees. However, this only applies to enforcement actions by the Auditor, not to a civil action by an employee. Therefore, an employee may file a lawsuit immediately and recover penalties, attorneys’ fees, costs, interests and other amounts permitted by the ordinance, in addition to unpaid wages.
The new law is significant in that it substantially increases potential liability for employers in Denver—and those who hire companies who fail to pay their employees. However, it also complicates an already confusing legal framework for wage claims. For many years, the FLSA and the Colorado Wage Claim Act have required payment of wages, overtime, and minimum wages. Now, employers and upstream parties in the City and County of Denver will have to comply with, and be subject to liability under, the new Denver ordinance. And, as discussed above, in many ways, the Denver ordinance is more onerous than the existing laws. This will be particularly challenging for multi-state employers and employers with employees across Colorado. Now more than ever, Denver employers and those who contract with Denver employers, must be aware of workplace laws and consult with competent employment counsel to ensure compliance.