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| 2 minutes read

Split Appellate Decision on State Wage Statute of Limitations Extends Confusion on Scope of Liability

Colorado employers may, once again, have to look waaaayyy back in time when facing claims for minimum wage violations after a recent Court of Appeals decision blessed a six-year statute of limitations for these claims.

In Perez v. By the Rockies, the plaintiff brought claims under the Colorado Minimum Wage Act (CMWA), alleging his employer, a fast-food restaurant, failed to provide him with meal and rest breaks under Colorado law. He brought the claims more than five years after he had worked at the restaurant. The trial court granted the restaurant's motion to dismiss, holding that the two- and three-year statutes of limitations in the Colorado Wage Claim Act (CWCA) applied and Perez's claims therefore were untimely. On appeal, a three-judge division of the Colorado Court of Appeals reversed, holding 2-1 that a six-year statute of limitations applies to claims under the CMWA.

Parties have argued for years over the proper statute of limitations for claims under the CMWA. The CMWA itself contains no statute of limitations, nor do the Minimum Wage Orders and COMPS Orders implementing the CMWA. Employers have long argued that the two- and three-year statute of limitations that apply to claims under the federal Fair Labor Standards Act and the Colorado Wage Claim Act apply to CMWA claims. Employees argued, and several courts agreed, that in the absence of a specific statute of limitations, Colorado's general six-year statute of limitations for recovering an unliquidated, determinable amount of money applies to CMWA claims. These court decisions left employers on the hook for minimum wage claims going back six years even though state law only required that employers keep pay records for three years and all other federal and state wage claims have two- or three-year limitation periods.

Employers and management-side practitioners had started to see a light at the end of the tunnel in 2022 when a Colorado federal district magistrate judge ruled that claims under the CMWA were subject to the two- and three-year statutes of limitations found in the other  wage and hour laws. However, that decision was a departure from the reasoning of at least two other recent federal cases in Colorado and, because the interpretation of Colorado statutes ultimately is up to the Colorado state courts, it was not binding on the Perez division.

Unfortunately for employers, as a state-court decision interpreting state law, Perez holds the most precedential value in terms of settling, once and for all, the statute of limitations question for CMWA claims.  Employers should keep in mind, however, that under the CMWA, plaintiffs are able to recover only the minimum wage--not a higher wage rate--for any violations.  Many wage claims will be brought under the CWCA in addition to or instead of the CMWA, as plaintiffs could potentially recover damages at pay rates above the minimum wage.

Employers should consider extending the length of time they retain pay records so they have the information necessary to defend against claims with longer limitation periods. Sherman & Howard employment attorneys can advise on all matters related to wage and hour compliance and assist with revisions to employer policies and practices if needed.