H.B. 2025-1001- Enhancement of Enforcement of Wage and Hour Requirements
New Risks for Business Owners*

By Herrick K. Lidstone and Adrienne C. Scheffey
Jennings Haug Keleher McLeod Waterfall

The 2025 Colorado General Assembly enacted a number of bills that change the field in a number of ways.  H.B. 2025-1090 dramatically impacts engagement letters from accountants, attorneys, and other hourly billing professionals.1  H.B. 2025-1001 significantly broadens the definition of “employer” and otherwise expands the applicability and potential liability under Colorado’s wage and hour laws found in Article 4 of Title 8 of the Colorado Revised Statutes.2

The bill as adopted by the General Assembly and signed by Governor Polis became effective on August 6, 2025, and amends the Colorado Wage Act3  to:

  • Expand the definition of “employer” for purposes of wage and hour laws to include an individual who owns or controls at least 25% of the ownership interest in an employer;
  • Prohibit an employer from making a payroll deduction below a worker’s applicable minimum wage;
  • Increase the Colorado Department of Labor and Employment’s (“CDLE”) claim authority from $7,500 to $13,000. 
  • Allow the director of the CDLE’s standards and statistics division to waive the penalty for an employer’s failure to pay claimed wages or compensation within 14 days after a written demand if certain specified conditions are met; 
  • Require reporting of wage and hour violations to governmental bodies with the “authority to deny, withdraw, or otherwise limit” an employer’s license permit or registration; and
  • Require a court to find that an employee pursued a wage claim that lacked substantial justification before awarding an employer reasonable costs and attorney fees in a civil action for unpaid wages or compensation. In such an action, the court may pursue all equitable relief to deter future violations and prevent unjust enrichment.
From a business owner’s perspective, the most significant aspect of the bill is the amendment to C.R.S. § 8-4-101 (Definitions) which redefines the term “employer” in subsection (6) to read as follows:
  • “Employer” has the same meaning as set forth in the federal “Fair Labor Standards Act of 1938”, 29 U.S.C. sec. 203 (d),4 and includes a foreign labor contractor, and a migratory field labor contractor or crew leader, and each individual who owns or controls at least twenty-five percent of the ownership interests5 in an employer; except that the provisions of this article 4 do does not apply to a minority owner of an employer that demonstrates full delegation of its authority to control day-to-day operations of the employer; the state or its agencies or entities; counties; cities and counties; municipal corporations; quasi-municipal corporations; school districts; and irrigation, reservoir, or drainage conservation companies or districts organized and existing under the laws of Colorado.

The statute now uses the term “minority owner” in the quoted section above.  This term is not defined in the statute, but appears to mean any person who owns at least 25% of the employer but less than 50%.  

  • Where, however, a single person owns or controls two or more entities that own the employer and their total ownership (and therefore the single person’s beneficial ownership) is 50% or more, it is our speculation that such person may not be able to grant a full delegation to avoid liability. At that point, existing case law would likely control any argument that the individual is not the “employer.”  
  • When calculating the 25% ownership, must the entity consider beneficial ownership of the underlying securities6 as is the case under the rules of the Securities and Exchange Commission – or must they consider only the issued and outstanding securities?  
  • What if securities are issued without voting rights but with a significant economic interest in the employer.  How should they be counted, if at all?
  • What if shares are owned through an employee stock ownership plan?  How are they to be counted?
  • How do you calculate “ownership” of a non-profit organization where the “owners” are not looking for economic return?

The statute does not further define this requirement for “full delegation” that will exempt the minority business owner from liability.  Does it mean that a minority owner (25% or even larger, but less than 50%) must be a totally passive owner with the appropriate written “full delegation” and avoid liability?  May the owner in question serve on the Board of Directors of the corporate employer or as a manager of the LLC employer even if the owner agrees not to participate in day-to-day decisions but rather only focus on long-term decisions such as negotiating and approving bank financing or the offer and sale of securities – or choosing the officers who will be running the day-to-day operations?  Can a board member or an LLC manager even grant a full delegation under the terms of the operative statute?7

Of course, even with an appropriate written full delegation, where the person becomes involved in day-to-day operations it likely invalidates the written delegation.

This is a significant expansion of the risk to 25% or greater owners of businesses that are accused of wage and hour violations and as noted above leaves a number of questions to be defined in CDLE rulemaking or judicial decisions.  

This change in the law enacted by HB 2025-1001 risks imposing significant potential liability on unsuspecting owners of employers and needs to be taken into account as lawyers are advising their employer clients and the owners of the employer clients.

Herrick K. Lidstone and Adrienne C. Scheffey are Partners with the Denver office of Jennings Haug Keleher McLeod Waterfall. Herrick practices in business and corporate law matters and Adrienne’s focus is employment law and litigation. They can be reached at hkl@jkwlawyers.com  and acs@jkwlawyers.com. 

* For an updated version, see Lidstone and Scheffey, “H.B. 2025-1001- Enhancement of Enforcement of Wage and Hour Requirements; New Risks for Business Owners”, available at https://ssrn.com/abstract=5615355. 1 See Lidstone, Herrick K., Colorado House Bill 25-1090 and its Impact on Attorney Engagement Letters, available at https://ssrn.com/abstract=5350241.  2 See H.B. 25-1001at https://leg.colorado.gov/bills/hb25-1001.  3  C.R.S. § 8-4-101, et seq. 4  29 USC 203(d) defines “employer” for the purposes of the federal Fair Labor Standards Act as follows: “As used in this chapter . . . ‘Employer’ includes any person acting directly or indirectly in the interest of an employer in relation to an employee and includes a public agency, but does not include any labor organization (other than when acting as an employer) or anyone acting in the capacity of officer or agent of such labor organization.” The term “person” is broadly defined in 29 USC § 203(1) to include “an individual, partnership, association, corporation, business trust, legal representative, or any organized group of persons.” 5  The Colorado Corporations and Associations Act defines the term “owner’s interest” in C.R.S. § 7-90-102(44) as “the shares of stock in a corporation, a membership interest in a nonprofit corporation, a membership interest in a limited liability company, the interest of a member in a cooperative or in a limited cooperative association, a partnership interest in a partnership, and the interest of a member in a limited partnership association.” I know that the term “ownership interest” is used in a number of statutory section generally referring to “ownership interest in property or accounts” (§15-11-205) and in discussing conflicts of interest for participants in sports or athletic events saying that certain “persons shall not have any ownership interest in, control of, or otherwise b e employed by a sports betting operator . . .” (§ 44-30—1502). The term is used similarly in § 5-16-122, § 10-6-103, § 24-18-102, and § 38-33.3-207 among other places. So what exactly is an ownership interest in this context is to be determined. 6 “Beneficial ownership” is defined in 17 C.F.R. § 240.13d-3 under the federal Securities Exchange Act of 1934 (15 U.S.C. § 78a et seq.) for the purposes of reporting requirements and entity ownership under the securities laws. Rule 13d-3(d)(1)(i) states that a “person shall be deemed to be the beneficial owner of a security . . if that person has the right to acquire beneficial ownership of such security . . . within sixty day, including but not limited to any right to acquire: (A) Through the exercise of any option, warrant or right; (B) through the conversion of a security; (C) pursuant to the power to revoke a trust, discretionary account, or similar arrangement; or (D) pursuant to the automatic termination of a trust, discretionary account or similar arrangement; . . ..” 7 For a corporation, Colorado law provides that “all corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of the board of directors.” C.R.S. § 7-108-401 for Colorado corporations; C.R.S. § 7-58-801 for cooperatives formed under the Uniform Limited Cooperative Association Act has similar language. The Colorado limited liability company act provides similarly broad powers to managers and to members of a member-managed LLC in C.R.S. §§ 7-80-401 and -405.

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