Court Ruling Creates Holiday Incentive Pay Twist for Colorado Employers

The Colorado Supreme Court has ruled in Hamilton v. Amazon.com Services LLC that Colorado law is not like federal law when it comes to holiday pay. The court found that the Colorado Overtime and Minimum Pay Standards Order (currently, COMPS Order 39) requires that holiday incentive pay is counted in the regular rate of pay for calculating overtime for nonexempt employees in Colorado.  

Before this decision, employers in Colorado that provide holiday pay generally followed the Fair Labor Standards Act (FLSA) when considering holiday pay for the purpose of overtime calculation. FLSA regulations (29 Code of Federal Regulations Section 778.203[c]) state that “extra compensation” paid to workers on holidays can be considered an “overtime premium” and not counted toward the regular rate of pay so long as it is not less than time and a half of the regular rate.

The court arrived at its conclusion based on Rule 1.8.1 of the COMPS Order, which excludes “holiday pay” from the regular rate but includes “all compensation paid to an employee” and “shift differentials.”

The court said that “holiday pay” can properly be excluded from the regular rate under the COMPS Order. It found, however, that “holiday incentive pay” was not the same thing. The court explained that “holiday pay” is money paid to an employee for “non-work hours.” On the other hand, “holiday incentive pay” is money paid to an employee for actual work performed. The state supreme court found that this key distinction resulted in “holiday incentive pay” being considered wages applicable to the regular rate under Rule 1.8.1 because it is, 1) part of “all compensation paid to an employee” and 2) a shift differential.

The court stated that holiday incentive pay for actual work performed on a holiday was necessarily part of “all compensation paid” for performing work; thus, it belongs in the category of pay that must be counted toward the regular rate.

The court further explained that holiday incentive pay is also essentially the same thing as a shift differential. Finding that a shift differential is a “higher wage or rate because of undesirable hours or disagreeable work,” the court reasoned that holiday incentive pay is the same thing: extra pay for employees who choose to work an undesirable holiday schedule.

Finally, the court resolved the apparent friction with the FLSA by ruling that a shift differential is “different” than an overtime premium. In any event, it said Colorado law was more protective than the FLSA, which merely “set a floor” for employee compensation.

The takeaway is that, in Colorado, employers covered by the COMPS Order should review their policies and practices and consider drawing a clear distinction between “holiday pay,” which is pay for nonwork hours on a holiday, and “holiday incentive pay,” which is wages paid to employees for working on a holiday. Employers should include any holiday incentive pay in the regular rate for overtime purposes.

Paul P. Parisi is an attorney with Jackson Lewis in Denver. © 2024 Jackson Lewis. All rights reserved. Reposted with permission.