Colorado’s 2026 Labor and Employment Law Changes: What Employers Should Know Regarding Payroll and Benefits in the New Year

Bayan Biazar, Associate

  As 2026 draws near, a few important statutory and regulatory updates are set to take effect on January 1 that will require Colorado employers to revise policies, payroll configurations, and internal leave administration. While the list is not exhaustive, the changes that are to take effect carry implications for employers navigating parental leave, minimum wages and wage thresholds, and compliance planning in the year ahead.

 Colorado’s Family and Medical Leave Insurance Program (“FAMLI”) Expansion[1]

            FAMLI currently provides eligible employees with up to twelve weeks of paid leave per year to care for and bond with a child. Starting on January 1, 2026 and beyond, Senate Bill 25-144[2] expands FAMLI to give employees with a newborn child that requires inpatient treatment in a neonatal intensive care unit (“NICU”) an extra twelve weeks of leave and benefits. This is in addition to the standard twelve weeks of “bonding” leave that FAMLI currently provides. In practice, eligible employees could be entitled to up to 24 weeks of paid leave.

            Further amendments to FAMLI provide for a new program premium schedule. FAMLI’s current premium rate is 0.9% of covered wages per employee. However, on January 1, 2026, the rate will decrease to 0.88%. Although the reduction is small, employers will need to ensure that their payroll systems apply the correct rate in January to avoid any under-or-over withholding and any potential reconciliation issues that may arise from failures to apply the correct withholding rate. From 2026 onwards, the director of FAMLI will set the premium rates by September 1 of the preceding year.[3]

 Minimum Wage and Exemption Threshold Changes

            Also set to take effect in the new year are several wage and hour changes under Colorado law. Colorado’s statewide minimum wage will rise to $15.16 per hour, assuming no local minimum wage applies.  The tipped minimum wage will also increase to $12.14 per hour, with the tip credit remaining capped at $3.02.

            Some municipalities take advantage of a state law passed in 2019 that allows local governments to set their own local minimum wages. Local minimums must be followed if higher than the state wage.  As of January 1, 2026, the following local minimum wages will take effect: Denver: $19.29 (tipped $16.27); Boulder: $16.82 (tipped $13.80); Boulder County (unincorporated) $16.82 (tipped $13.80); and Edgewater: $18.17 (tipped $15.15). These adjustments affect not only base-pay, but also overtime calculations, regular-rate determinations, tip-credit compliance, and potential penalty exposure under the Colorado Wage Claims Act.

            With these wage increases, 2026 also brings in new exempt classification thresholds within the broader wage-and-hour framework. Under Colorado law, employees may be classified as exempt from overtime and minimum wage requirements only if they meet both a duties test and a minimum statutory threshold, which are defined and updated annually through the Colorado Overtime & Minimum Pay Standards[4] and Pay CALC Orders.[5] The salary test sets a minimum amount an employee must be paid on a salaried basis to qualify for an executive, administrative or professional exemption. The duties test refers to the substantive analysis of what an employee does in their role. The minimum salary required in 2026 will rise to approximately $57,784.00 annually, up from $56,485.00 in 2025. Employers who do not keep pace with these increases could face misclassification exposure, statutory penalties, liquidated damages, and attorneys’ fees.[6]

 Key Takeaways

            The employment law changes taking effect on January 1, 2026 reflect Colorado’s continued shift toward incremental but cumulative regulation of wages, leave, and employee protections. Employers should plan now to update payroll systems for new minimum wage and exemption thresholds, reassess exempt classifications in light of annually increasing salary requirements, and revise leave policies to account for expanded FAMLI benefits, including longer NICU-related absences.

            As always, Campbell Litigation is available to assist with navigating these changes and addressing compliance as the new requirements take effect.

[1] See https://www.rockymountainemployersblog.com/blog/2025/5/8/colorado-general-assembly-passes-bill-granting-additional-famli-leave-in-certain-circumstances-and-prescribing-new-famli-premium-rates for a more detailed discussion on SB25-144.

[2] See https://content.leg.colorado.gov/sites/default/files/documents/2025A/bills/2025a_144_enr.pdf for the full text of SB25-144.

[3] FAMLI premium rates are subject to a cap of 1.20% of wages per employee.

[4] See https://cdle.colorado.gov/sites/cdle/files/proposed_2026_comps_order_%2340_7ccr_1103-1_9.30.25.pdf for the full proposed COMPS Order set to take effect on January 1, 2026.

[5] See 7 C.C.R. 1103-1; and 7 C.C.R. 1103-14.

[6] Also set to take effect on January 1, 2026 are amendments to the Colorado Anti-Discrimination Act. “Gender expression” is formally addressed as part of the protected classes. Employers should review non-discrimination/harassment policies, training modules, internal complaint procedures and inclusion language to ensure “gender expression” is clearly covered.