Colorado Supreme Court Rules Holiday Incentive Pay Must Be Included in Calculation of Employee’s Overtime Rate
A recent Colorado Supreme Court decision in Hamilton v. Amazon.com Services LLC has significant implications for Colorado employers subject to the Colorado Overtime and Minimum Pay Standards Order (“COMPS Order”) regarding overtime pay calculations. As a key takeaway, the ruling mandates the inclusion of holiday incentive pay in the “regular rate of pay” for overtime purposes, diverging from federal Fair Labor Standards Act (“FLSA”) guidelines.
The case originated from a class action lawsuit filed by a former Amazon warehouse employee alleging underpayment of overtime during weeks with company holiday work. Specifically, the plaintiff claimed that his employer failed to include holiday incentive pay in the “regular rate of pay” calculation for overtime. A federal district court initially dismissed the complaint for failure to state a claim, and the plaintiff then appealed the dismissal to the Tenth Circuit. The appellate court, in turn, certified the following question to the Colorado Supreme Court:
“Whether the Colorado law includes or excludes holiday incentive pay from the calculation of “[r]egular rate of pay” under 7 Colo. Code Regs. § 1103-1:1, secs. 1.8 and 1.8.1.”
The Court ruled that holiday incentive pay should be included in the “regular rate of pay” calculation for two primary reasons:
- Plain Meaning: It falls within the plain meaning of “all compensation paid to an employee” under Rule 1.8.1 because the incorporated definition of “compensation” includes “[a]ll amounts for labor or service performed by employees.”
- Shift Differential: The court considered holiday incentive pay as a “shift differential” (a higher wage rate paid for an employee to work untraditional hours) under the COMPS Order, explicitly listed for inclusion in the “regular rate” calculation under Rule 1.8.1.
Importantly, the court distinguished between holiday pay for “non-work hours,” which can still be excluded from the regular rate, and holiday incentive pay for hours actually worked on a holiday. This distinction is crucial for employers to understand when making their overtime calculations in any workweek where a holiday incentive was paid to an employee.
In light of this decision, Colorado employers subject to the COMPS Order should review and update their overtime policies and practices. The Court’s decision could be construed to have retroactive effect; therefore, employers should also anticipate and prepare for employee inquiries or claims related to past overtime payments in workweeks where the employee worked on a holiday and incentive pay was paid to the employee.
Disclaimer: What is written here is for general information only and should not be taken as legal advice. If legal advice is needed, please consult an attorney