Summary
The Colorado Supreme Court recently clarified how holiday incentive pay impacts overtime calculations under Colorado wage law. Employers must carefully evaluate payroll practices and overtime formulas to remain compliant with the Colorado Overtime and Minimum Pay Standards (COMPS) Order. This article explains the legal ruling, employer compliance risks, and how businesses can reduce wage and hour liability exposure.
Employers and employees in Colorado should take note of a recent Colorado Supreme Court decision that may significantly affect how overtime wages are calculated. In Hamilton v. Amazon.com Services LLC, the court addressed whether holiday incentive pay must be included in the calculation of an employee’s regular rate of pay when determining overtime compensation. The court concluded that under Colorado law, holiday incentive pay must be included in the regular rate of pay.[1]
The case arose from a dispute involving an Amazon warehouse employee in Aurora, Colorado. The employee received two forms of holiday-related compensation. First, Amazon provided holiday pay, which compensated employees at their normal hourly rate for designated company holidays regardless of whether they worked. Second, if employees worked on those holidays, they received holiday incentive pay, which compensated them at one and one half times their regular hourly rate for the hours worked on the holiday.
The employee filed a lawsuit alleging that Amazon improperly calculated overtime pay during weeks when he worked both a holiday shift and more than forty hours. According to the complaint, Amazon excluded the holiday incentive pay when calculating the employee’s regular rate of pay. Because overtime is calculated based on that regular rate, excluding the additional compensation resulted in a lower overtime payment.
The question at issue reached the United States Court of Appeals for the Tenth Circuit, who returned the case to the Colorado Supreme Court to clarify whether Colorado law requires that holiday incentive pay be included when calculating the regular rate of pay.
The Colorado Supreme Court focused on the language of the Colorado Overtime and Minimum Pay Standards Order, commonly referred to as the COMPS Order. Under these regulations, the regular rate of pay includes all compensation paid to an employee for work performed, subject to limited exceptions. Certain types of compensation may be excluded, such as vacation pay, holiday pay, and other payments for non-work hours.[2]
The Court explained that holiday incentive pay does not fall within those exclusions because it compensates employees for hours they worked. Holiday pay, by contrast, compensates employees for time when they do not work. Because the regulations only permit exclusions for compensation related to non-work hours, the court determined that holiday incentive pay must be included in the calculation.
The Court also observed that holiday incentive pay functions as a type of shift differential, which is additional pay provided for working undesirable hours. Colorado regulations specifically include shift differentials in the regular rate calculation. As a result, the Court concluded that holiday incentive pay must be included when determining the regular rate of pay for overtime purposes.
This decision is significant for both employers and employees. Employers should review their payroll practices to ensure that overtime calculations properly account for all required forms of compensation. Wage and hour compliance under Colorado law can be complex, and mistakes in overtime calculations can expose employers to significant liability.
If you have questions about overtime pay, holiday compensation, or compliance with Colorado wage laws, experienced labor and employment counsel can help. Our firm regularly advises employers on employment law matters and can ensure your pay or other employment practices comply with Colorado law. If you have questions about the legal status of your employment policies, or if your business needs guidance on any employment law matter do not hesitate to contact us.
[1] Hamilton v. Amazon.com Servs. LLC, 2024 CO 10 (Colo. 2024)
[2] 7 Colo. Code Regs. 1103-1
FAQs
Proper overtime calculations help businesses avoid wage disputes and costly employment litigation.
Yes. Employers may face lawsuits, penalties, and back-pay claims for noncompliance.
The COMPS Order establishes Colorado wage and hour rules, including overtime and minimum wage requirements.
In some cases, yes. Certain incentives or premium holiday pay may affect overtime calculations under Colorado law.
Adam L Weitzel is the President of Business Law Group and a Colorado business attorney with extensive experience advising businesses and owners primarily on employment law, tax law, and corporate compliance. Adam earned his law degree from The Ohio State University Moritz College of Law and an LL.M. in Taxation from Georgetown University Law Center. Drawing from both his legal background and practical experience as a business owner, he provides strategic, business-focused guidance to companies throughout Colorado.
