Colorado Hiring Laws for Small Businesses
Colorado has a flat income tax rate but progressive employment laws — including new non-compete restrictions. The rules you need before hiring your first Colorado employee.
$14.81/hr
as of 2025
Immediately
Income-based
Yes
Wage & Hour
Minimum wage: $14.81/hr
This is the Colorado statewide minimum as of 2025. The federal minimum ($7.25) applies where a state has no higher rate. Some cities within Colorado may set higher local minimums — check municipal ordinances.
Break requirements
Federal FLSA only — no state-specific break requirements.
Overtime
Federal FLSA requires 1.5x pay for hours over 40 in a workweek for non-exempt employees. Some states (notably California) also require daily overtime after 8 hours in a day.
Paid sick leave
Colorado has a statewide paid sick leave law. Accrual rate typically 1 hour per 30-40 hours worked, with annual usage caps.
Termination & Final Pay
Final paycheck timing
- Involuntary termination: Immediately
- Voluntary quit: Next scheduled payday
Vacation payout on separation
Not automatically required by state law — depends on your written policy and offer letters. Written "use it or lose it" policies are generally allowed.
At-will employment
Colorado is an at-will state — either party can end employment at any time, for any legal reason (not for a discriminatory or retaliatory reason). Written employment contracts and public policy exceptions can limit this.
Non-Compete Agreements
Non-competes are banned for employees below a state-defined income threshold. Above that threshold they may be enforceable with reasonable scope.
Contractor vs Employee Classification
IRS common-law test — control, financial arrangement, and relationship type. More flexible than ABC.
Why this matters: Misclassifying an employee as a contractor exposes you to back wages, unemployment tax, workers comp, and penalties. State enforcement has tightened significantly since 2018.
First-Employee Onboarding Checklist
- Federal: Get EIN (irs.gov), register for federal payroll (Form 941 quarterly)
- State withholding: Register with Colorado Department of Revenue
- State unemployment insurance (SUI): Register with Colorado unemployment agency and pay quarterly
- Workers' compensation: Required at 1 employee. Purchase through private market.
- New hire reporting: Report to Colorado new hire directory within 20 days of hire (federal PRWORA requirement)
- I-9 verification: Complete within 3 business days of hire (federal requirement)
- W-4: Get federal W-4 and state equivalent (if income tax applies)
- Required posters: Federal + Colorado labor law posters (available free from state DOL)
Colorado-Specific Employment Rules
The rules and quirks that make hiring in Colorado different from other states.
- Colorado minimum wage is $14.81/hr for 2025 (Denver higher at $18.81); adjusted annually for inflation.
- Colorado's Healthy Families and Workplaces Act mandates 48 hours of paid sick leave/year plus additional public health emergency leave.
- Colorado's non-compete law (HB22-1317) restricts non-competes to workers earning at least the 'highly compensated employee' threshold (~$123K in 2025); banned for lower earners.
- Colorado FAMLI paid family and medical leave program funded via employer/employee payroll contributions began benefits in 2024 (up to 12 weeks).
- Colorado final paycheck must be paid immediately upon involuntary termination (same day).
Reference only — not legal advice.
Employment law changes frequently and turns on facts. For specific hiring decisions, terminations, or contractor classifications, consult a Colorado-licensed employment attorney. City-level rules (Seattle, NYC, SF, etc.) may add requirements beyond state law.