Colorado Includes Holiday Incentive Pay in Regular Rate of Pay Calculation

What happened?

On September 9, 2024, the Colorado Supreme Court issued a highly anticipated decision, finding that the “regular rate of pay” under Colorado law does include holiday incentive pay for purposes of calculating overtime. 

Quick Summary:

• The Colorado Supreme Court ruled in Hamilton v. Amazon.com Services LLC, that holiday incentive pay must be included in the “regular rate of pay” for calculating overtime, differing from the federal Fair Labor Standards Act (FLSA).

• This decision, which treats holiday incentive pay as shift differential compensation, has significant implications for Colorado employers.

• Unlike federal law, which excludes holiday premium pay from the regular rate calculation if paid at least 1.5 times the usual rate, Colorado law requires its inclusion.

• The Colorado Supreme Court reminded employers that state law can differ from federal law, particularly in calculating the regular rate of pay for overtime for employees working over 40 hours a week.

What are the details?

Background:

• Under the Colorado Overtime and Minimum Pay Standards Order (COMPS Order), the “regular rate” includes all compensation except certain exclusions.

• The plaintiff claimed Amazon underpaid overtime by not including holiday incentive pay in the regular rate.

• The court’s decision differs from federal law, which excludes holiday premium pay from the regular rate if paid at least 1.5 times the usual rate.

The Colorado Supreme Court’s decision

• The Colorado Supreme Court ruled in Hamilton v. Amazon.com Services LLC that holiday incentive pay must be included in the “regular rate of pay” for calculating overtime under Colorado law.

• This decision differs from the federal Fair Labor Standards Act (FLSA), which excludes holiday incentive pay from the regular rate if paid at least 1.5 times the usual rate.

• The court determined that holiday incentive pay is a type of shift differential compensation and must be included in the regular pay rate for overtime purposes.

Business Considerations

• Employers should review and update overtime policies to ensure the “regular rate of pay” includes holiday incentive pay and similar compensations.
• Employers should anticipate and prepare for potential retroactive claims from employees regarding past overtime calculations.
• Employers should verify if their business is covered by the Colorado Overtime and Minimum Pay Standards (COMPS) Order, which generally applies to private-sector employers in Colorado.
• Employers should ensure holiday pay for time not worked is excluded from regular rate calculations but include holiday incentive pay for overtime calculations.

Source References

• Hamilton v. Amazon.com Services LLC

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