With the New Year here, a new round of laws have taken effect both nationwide and in Colorado. Amongst new laws that are important for businesses in Colorado are those setting new standards for minimum wage. Effective January 1, 2014, Colorado state minimum wage is now $8.00 for the standard employee, and has increased to $4.98 for tipped employees, and no more than $3.02 per hour in tip income may be used to offset the minimum wage of tipped employees.

Importantly, if both federal and Colorado state minimum wage laws cover the employee, the employer must pay the higher minimum wage rate. For example, federal minimum wage is currently set at $7.25 an hour, which is obviously lower than Colorado’s $8.00 per hour; therefore, employers in Colorado are subject to the higher $8.00 per hour rate, despite the existence lower federal minimum wage rates. Application of the higher available rate applies to tipped employees as well, where federal tipped minimum wage is currently $2.13 per hour. In Colorado, employers must pay tipped employees the higher rate of $4.98 per hour. If the employee’s tips combined wage of at least $4.98 per hour does not equal the minimum hourly wage, the employer is responsible for making up the difference. 

This year’s increase in minimum wage is nothing new, as minimum wage requirements have increased over past years due to constitutional mandate. More specifically, the increase is based in the Colorado Constitution, which requires that Colorado minimum wage be adjusted annually for inflation, as measured by the Consumer Price Index used for Colorado. Colorado business owners  and their general counsel should be aware of the new rates, but also expect rates to continue to climb in future years.