The Weekly Guide to Employment Law Developments

The Rocky Mountain Employer

Labor & Employment Law Updates

Colorado Supreme Court Hears Oral Argument on Overtime Pay Calculations After Tenth Circuit Certifies Question of State Law

A.J. Peters, Of Counsel

On March 13, 2024, Colorado’s high court heard argument from the parties in Hamilton v. Amazon.com Services LLC, a federal proposed class action against the retail giant challenging the company’s calculation of overtime pay when employees work shifts already paid at a premium “holiday incentive pay” rate.

Hamilton v. Amazon.com Services LLC - Background

Daniel Hamilton worked at an Amazon warehouse in Aurora, Colorado.  In January 2022, he filed a state court complaint on behalf of himself and others similarly situated, claiming Colorado warehouse workers have been underpaid overtime under the Colorado Wage Act.

Hamilton alleges that Amazon owes him $143.54 in unpaid overtime.  His complaint, however, seeks class action certification for the “hundreds or even thousands of hourly employees” working at Amazon’s five or more warehouses throughout Colorado.  In particular, Hamilton challenges the company’s practice of excluding a premium time and one half rate that Amazon pays to workers who work on certain holidays, such as Thanksgiving and Labor Day, from employees’ regular rate of pay for purposes of calculating overtime rates. 

Colorado’s overtime rules are provided in Colorado Overtime and Minimum Pay Standards Orders (COMPS Orders), updated periodically.[1]  For non-exempt employees, all hours worked in excess of 12 hours in a workday and/or over 40 hours in a workweek must be paid at 1.5 times the employee’s “regular rate of pay.”  Generally speaking, an employee’s regular rate of pay is calculated by dividing the employee’s compensation by the number of hours worked within a workweek, for purposes of overtime compensation.

The crux of Hamilton’s argument is that the time and one half premium pay for “holiday incentive pay” must be included as part of his (and others’) total compensation for purposes of calculating the regular rate of pay and associated overtime pay during weeks that include a covered holiday.   

Federal Court Removal and Dismissal

Amazon removed Hamilton’s lawsuit from Arapahoe County to the U.S. District Court for the District of Colorado and moved to dismiss Hamilton’s claim.  Amazon argued that Colorado law does not expressly require premium holiday pay to be included in an employee’s regular rate for overtime purposes, and that the federal Fair Labor Standards Act (FLSA) clearly permits employers to exclude such premium pay for these purposes.

On March 3, 2023, the District Court granted Amazon’s motion to dismiss on the grounds that Colorado law is silent on including premium holiday pay earned during work hours in an employee’s regular rate of pay and the Court’s ruling therefore rendered moot Hamilton’s motions to certify the class and for an order certifying a determinative question of Colorado law.  Hamilton appealed the District Court’s ruling to the Court of Appeals for the Tenth Circuit.

Tenth Circuit Certifiies Question to Colorado Supreme Court

On January 12, 2024, the Tenth Circuit certified to the Colorado Supreme Court the “novel” question “determinative of the case at hand:” whether Colorado’s COMPS Order includes or excludes “holiday incentive pay” from the calculation of an employee’s “[r]egular rate of pay.”

In its order, the Tenth Circuit questioned whether Colorado’s regulations depart from the FLSA and supersede it as more generous to employees.  Concluding that neither party had directed the court to controlling Colorado authority on this question, the Tenth Circuit asked the Colorado Supreme Court to weigh in.

For its part, the Colorado Supreme Court heard oral argument from attorneys for Hamilton and Amazon on March 13, but then issued a subsequent order on March 18, ordering the parties to provide supplemental briefing and inviting amici curiae briefs on the certified question.

Employer Considerations

The outcome of the Colorado Supreme Court’s ruling on whether premium holiday incentive pay earned during work hours must be included in an employee’s regular rate of pay will undoubtedly affect Colorado employers’ decisions as to whether to offer such premium payments in the future.  Assuming the Colorado Supreme Court sides with Hamilton, employers with such programs will need to be certain that their overtime pay calculations are accurate, or else they may face significant liability under Colorado’s penalty provisions for wage and hour noncompliance.  Campbell Litigation will continue to monitor this case as it develops and remains available to assist employers with federal and state wage and hour law questions and issues.

[1] See, e.g., https://cdle.colorado.gov/sites/cdle/files/Adopted%20COMPS%20Order%20%2339%207%20CCR%201103-1%20%5Baccessible%5D.pdf