Note: The following guidance is a brief, general overview of permissible and impermissible deductions from earned wages under Colorado law. On April 14, 2022, the Division published a new "fact sheet"--INFO #16: Deductions From, and Credits Towards, Employee Pay--with more detailed guidance on this topic.
Deductions required by local, state, or federal law
Examples include, but are not limited to, deductions for taxes, social security, FICA requirements, Medicare, garnishments, or any other court-ordered deductions.
Deductions by written agreement between the employer and employee
The agreement may be for loans, pay advances, goods or services, and equipment or property. The agreement must be in writing, enforceable, and not in violation of law.
Deductions necessary to cover the replacement cost of a shortage due to theft by an employee
Colorado law provides the following criteria for deductions related to theft:
- A report must be filed with the proper law enforcement agency.
- If criminal charges are not filed against the accused employee within 90 days after the filing of the report, or the accused employee is found not guilty in a court action, or the charges are dismissed, the accused employee shall be entitled to recover any amount wrongfully withheld plus interest.
- If an employer acts without good faith in making such charges, in addition to the amount wrongfully withheld, the employer could be held liable for three times the amount wrongfully withheld plus attorney's fees, court costs, and other costs the court finds reasonable.
Deductions that are authorized by the employee and that can be revoked.
- Examples include, but are not limited to, deductions for insurance benefits, savings plans, stock purchases, voluntary pension plans, charities, and deposits to financial institutions.
- Deductions for union dues
- Must be in writing between the employer and employee.
Deductions for the amount of money or the value of property that the employee failed to properly pay or return to the employer
- In the case where a terminated employee was entrusted during his or her employment with the collection, disbursement, or handling of such money or property. In this instance the employer shall have 10 calendar days after the termination of employment to audit and adjust the accounts and property value of any items entrusted to the employee before the employee's wages or compensation shall be paid in accordance with C.R.S. 8-4-109.
Deductions for property damage
- In general, employers may not deduct from an employee's wages or compensation for the cost of damage or depreciation to the employer's property. For example, an employer may not deduct the cost of damage to a company car from an employee's wages.
Deductions as fines for employee behavior or actions
- In general, employers may not apply fines to an employee's earned wages or compensation based upon employee behavior or performance. For example, an employer may not deduct from the wages of a restaurant waitperson for the cost of a meal in the event that the customer does not pay the bill.
- Colorado Revised Statutes 8-4-105 (Payroll Deductions Permitted)
- Colorado Revised Statutes 8-3-108(1)(i) (Union Dues Deductions)
- INFO #16: Deductions From, and Credits Towards, Employee Pay
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