Wage theft crackdown bill is now law, but debate over how it may affect smaller employers is ongoing

One of the bills to emerge from Colorado’s eventful legislative session was House Bill 25-1001, which strengthened worker protections against wage theft and enforced overtime laws. While several groups support the bill’s goal, others are concerned about the impact of stricter penalties on small businesses.

Colorado Gov. Jared Polis signed House Bill 25-1001 into law in mid-May after vetoing a different wage theft bill in 2024 that focused specifically on the construction sector. Sponsors of the 2025 bill, all Democrats, have been working with Polis’ team since summer 2024 to address the governor’s concerns in their new bill.

An estimated $728 million in wages are stolen from nearly 440,000 workers each year in Colorado, according to a 2022 comprehensive analysis by the Colorado Fiscal Institute.

Wage theft can include not paying workers minimum wage, non-payment of wages and misclassifying workers as independent contractors to avoid paying overtime. The bill increases enforcement for each of these issues.

It also creates several changes to how victims of wage theft recover stolen wages and how employers are held accountable. The new law outlaws pay deductions below minimum wage. It also increases the cap for wage theft claims to $13,000 with room for inflation adjustments and expedites the process to pay wage theft victims more quickly and punish employers.

A deterrent to paying workers less

While many of the penalties listed in the bill are for offenses that are already illegal, the increased severity of the penalties “give teeth” to the law and “deter bad actors” from paying workers less, according to prime sponsor and House Majority Leader Monica Duran, a Jefferson County Democrat.

“I think this bill is an important step forward for workers and for victims of wage theft who need to seek redress,” said Nina DiSalvo, policy director for Colorado nonprofit Towards Justice. 

Provisions — such as the one allowing employees to have late pay penalties waived, so long as the full amount is paid within 14 days — are being celebrated as wins for smaller employers who may make mistakes while acting in good faith. Other penalties were not as popular among business organizations in Colorado.

The Colorado Chamber of Commerce, which had originally shown support for the bill and was working with sponsors to craft amendments that would appease some of the concerns of local business owners, withdrew its support after the majority of the chamber’s proposed amendments were not pushed forward.

“We had hoped to make some progress with the bill sponsors, but unfortunately, that didn’t really happen in the end,” said Meghan Dollar, senior vice president of government affairs for the Colorado Chamber of Commerce.

Dollar said the chamber disapproves of the bill’s provisions allowing complainants to seek compensatory damages, changes to the conditions for employers to be awarded attorneys’ fees, and the legal assumption that an adverse action toward an employee within 90 days of them filing a wage theft claim could be presumed as retaliation from the employer.

“Business leaders argued that the provisions in HB 1001 will make it too easy for workers to file even frivolous complaints against law-abiding businesses without fear of blowback and could discourage funding of businesses by creating new liability for investors,” Ed Sealover, vice president of strategic initiatives, wrote in an online news site published by the Colorado Chamber of Commerce.

Concerns for small businesses

Chris Romer, president and CEO of Vail Valley Partnership, said some of these stricter provisions could disproportionately impact small businesses that may not have the staff to closely monitor labor law compliance. Roughly 90% of businesses in Eagle County have fewer than 20 employees, Romer said.

“There still is the concern of small businesses being swept in with the bad actors,” he said.

DiSalvo said that although the changes to when an employer can be awarded attorneys’ fees are pretty minimal, the sponsors viewed it as a necessary part of the bill in regards to empowering victims to speak up about unfair or withheld pay.

“I have seen the possibility that an employee could be held liable for attorneys’ fees having a real chilling effect on low-wage workers in particular and their willingness to bring forward their claim,” she said. “So hopefully, it adds some additional clarity for employers and employees and also gives employees some comfort that they’re not going to be on the hook for attorneys’ fees and therefore feel more comfortable enforcing their rights.”

One change the chamber was able to negotiate on the Senate floor was a cap on compensatory damages awarded for emotional distress. The limits mirror caps outlined in Colorado’s Anti-discrimination Act and change based on the number of employees, with the highest cap being $300,000.

“I think from a business perspective, we felt like probably the biggest concern was the lack of cap on those compensatory damages,” Dollar said. “We prioritized getting a cap on those damages because we felt like that would have the most protection for businesses in Colorado.”

The responsibility for wage theft is shared with more people under the bill, which defines an employer as any individual owning or controlling 25% or more of a business. The bill was amended so that minority owners with no involvement in the day-to-day operations are exempt from sharing liability, which partially soothed concerns from business owners that outside investors would be less inclined to invest in businesses if it caused them to share responsibility for wage theft disparities committed by the owner.

“I think at the end of the day, this being designed to punish bad actors is a good thing,” Romer said. “There were some revisions that I think are really positive.”

The bill’s supporters are celebrating the passage of the bill after almost a full year of work on it, and see its broader application as a way to crack down on wage theft issues that have run rampant for too long.

Even with lingering concerns from when the bill was first proposed, Romer said he still believes the bill will do more good than harm. He was especially supportive of the bill’s strengthening of protections for immigrant workers against employers who threaten an employee’s legal status to keep them from reporting wage theft.

“The huge majority of businesses who are committing wage theft are not doing it through administrative oversight or through payroll processing errors or anything. Those who are doing it, they should be punished,” heRomer said. “There’s a little bit of a risk of small business being swept in, but there’s some guard rails put in for that, and at the end of the day, it’s up to those businesses to follow the rules.”

The bill included an appropriation of $328,210 to the Department of Labor and Employment, part of which will support the hiring of staff to manage the anticipated increase in wage claim investigations and enforcement actions, according to the bill’s fiscal note.

“We’re hopeful that the resources that are given to the Department of Labor and Employment will at least make it so those issues are dealt with on an administrative level … rather than in the court,” Dollar said.