In Colorado, holiday incentive pay must be included when calculating regular rate

On January 12, 2024, the U.S. 10th Circuit Court of Appeals (whose rulings apply to employers in Colorado, New Mexico, Utah, and Wyoming, as well as two other states not included in Mountain West Employment Law Letter) asked the Colorado Supreme Court to clarify whether holiday incentive pay must be included when calculating an employee’s regular pay rate under Colorado law. On September 9, the Colorado Supreme Court responded: Yes, it must be included.

Regular pay rate

Employees who work more than 40 hours per week must receive overtime pay at a rate that is 1.5 times their regular pay rate. Some states also have daily overtime requirements. For example, in Colorado, employees who work more than 12 hours per workday or 12 consecutive hours must also receive overtime pay at 1.5 times their regular pay rate.

Importantly, the regular pay rate isn’t the same as the base hourly rate. The regular pay rate is a calculation that incorporates nonovertime compensation received for work performed during a workweek.

For many reasons, calculating the regular pay rate is complicated. One complication arises because federal requirements can differ from state requirements. The federal Fair Labor Standards Act (FLSA) sets minimum requirements upon which states can set their own more stringent requirements. So, employers must ensure their regular pay rate calculations comply with both federal and state requirements.

Facts