Termination: An Overview in Colorado
Employers owe their employees a duty of loyalty and fair dealing. Many courts in Colorado define this duty to be that of good faith and fair dealing in the employee-employer relationship. It is set forth from the beginning of the employment relationship to the termination of the relationship. When the employment ends, the employer must do so for a fair and proper reason, as defined by the law, and cannot discharge the employee for other reasons that deny the opportunity to retain employment with the company. These other reasons can include, but are certainly not limited to: (1) the employee’s race, color, or creed; (2) age; (3) sex; (4) pregnancy; (5) genetic information, or condition; (6) disability; and/or (7) the employee’s color, religion, national origin, sex, pregnancy, or ancestry. Even if an employer generally doesn’t require its employees to work on holidays, it cannot terminate an employee who declines to work on a religious holiday because that firing would be unjust . Federal law caps the damages an employee can receive based on this category at $300,000 per incident, while state law has no cap.
Colorado law generally considers employment to be "at-will." In an at-will employment arrangement, either the employer or employee is free to terminate the employment relationship for any reason or no reason at all without giving prior notice. However, each employment relationship is unique, and any of the following could result in the employee being regarded as not being an at-will employee: (1) the employee performs a unique or specialized function, which requires the employer to invest substantial time or money in the education or training of the employee; (2) the employee is a member of a protected class; or (3) the employer, through policies or procedural manuals, by actions or statements of supervisory personnel, or by other means, induces the employee to reasonably believe that continued employment is guaranteed. If the employee is not considered at-will, the employer generally must have a "just cause," as defined under the law, to terminate the employee.
Legal Grounds for Termination
In Colorado, the law recognizes two principal legal bases for terminating an employee: "just cause" and the employee’s "at-will" status. Just cause for termination in Colorado generally involves some breach of the employment contract by the employee, such as fraud, dishonesty, gross negligence or other similar conduct. Colorado courts have also found for employees who were terminated for exercising a legal right or doing something that public policy would encourage or protect, such as reporting conduct that is contrary to law or public policy (for example, refusing to commit perjury in violation of Colorado law). Much of this is articulated in case law, as Colorado does not have a specific law that defines "just cause" for termination.
Different mining or other industry regulations may require the employer to show just cause for termination in order to terminate an employee without liability. For example, the federal Railroad Unemployment Insurance Act provides that an employee in covered employment may not be discharged for a reasonable absence due to illness or injury, if the employee provides notice to the employer and medical documentation supporting the basis for the absence. Additionally, collective bargaining agreements may define the circumstances under which employees can be terminated, and this should be reviewed carefully in any particular situation.
If no contract exists, whether express or implied, then Colorado follows the at-will employment doctrine. This means that absent a contract, the employment relationship is terminable at the will of the employee or employer for any reason, with or without cause. Under this doctrine, as long as the employee is not being terminated for an unlawful reason, a Colorado employer may terminate him or her for any reason or no reason at all. Actual or suspected union organizing activity or "whistleblowing" (reporting an employer’s illegal activity) is an example of an unlawful reason.
Colorado law specifically protects against wrongful or retaliatory discharge. Colorado Revised Statutes § 24-34-402.5 entitled retaliatory discharge provides the exclusive remedy for a retaliatory discharge claim. It is intended to codify the existing common law claim for wrongful discharge in violation of public policy, meaning that for claims arising on or after August 7, 2008 (when the statute went into effect), it will no longer be possible to bring a claim for wrongful discharge in violation of public policy.
Retaliatory discharge is defined by statute as "discharge from employment or any form of discipline related to employment whereby an employer threatens, disciplines, discriminates against, or retaliates against an employee for … disclosing information to a supervisor or a public body in accordance with section 24-50.5-101." As such, if an employee is discharged or disciplined because he or she has disclosed information to a government agency or supervisor, the employee may have a claim for retaliatory discharge under the statute. While discharge is clearly included, the statute does not define "discipline," and the statute does not specifically prohibit discharges undertaken in retaliation for an employee’s refusal to engage in illegal activity when asked by an employer or supervisor.
The statute provides that a cause of action for retaliatory discharge must be filed within 90 days of the date of the occurrence of the alleged retaliatory discharge. Before filing suit, an employee must give the Colorado Department of Labor and Employment written notice of the intention to file a civil action within 90 days of the retaliatory discharge. Upon providing the written notice, an employee must wait 60 days before filing a civil action unless the department notifies the employee that the department is unable to resolve the matter. During the 60-day period, the department must investigate the claim. If the department is not able to resolve the matter, an employee may then file a civil action in court. Regardless of what an employer does or fails to do to investigate or remedy the situation, the discharge or discipline is not actionable under the statute unless the employer meets the statutory requirements of a retaliatory discharge.
Unlawful Termination Claims
In Colorado, there are a few different theories of recovery for wrongful termination. Colorado employees may assert discrimination claims — including age, race, sex, or disability discrimination — and retaliation claims (fired for filing a workers’ compensation claim, for example). Further, they might also argue that the termination was in breach of an implied contract. We’ll now take a look at these categories of wrongful termination claims.
Discrimination Not every employee’s firing is unlawful as a matter of the state, municipal, and/or federal law. However, unlawful discrimination occurs when a terminated employee can prove that his or her termination violated state or federal laws that make it illegal for employers to fire employees simply because of their race, sex, disability, religion, color, country of national origin, sexual orientation, age, or marital status. For most discrimination claims, employees have the burden of proof to show that the protected category actually motivated the employer to fire them. That is, the firing was not truly a business decision but the result of bias and stereotypes against the employee’s protected characteristic. Many times, employers will provide reasons for the firings and the employees bear the burden of showing those reasons were not legitimate.
Retaliation Retaliatory termination occurs where the employer terminated an employee for exercising rights guaranteed by the law, including the right to file a workers’ compensation claim, protect wage or overtime rights, engage in protected whistle-blowing activity, or refuse to perform work in hazardous conditions. In a whistle blowing context, for example, firing an employee who exposes the employer for engaging in illegal activities in violation of a public policy would be unlawful in that it is intended to deter other employees from engaging in the same conduct and thereby frustrates public policy. Similar to discrimination claims, employees seeking to vindicate a retaliation claim bear the burden of proving that the retaliation was the real reason for the termination.
Implied Contract An implied contract claims is available if an employee claims the firing violated an implied contract (even if none exists) that was supported by specific company policies, procedures, or statements by the employer. Although most states view employment as "at will," and courts will usually look to written contracts for the employment relationship, courts in Colorado have determined that an employment relationship is not always "at will." The employee must show that the employer’s actions raised an implied agreement that the employee could only be fired for a specified reason.
What Employees Are Legally Entitled to Following Termination
Colorado law entitles employees to certain rights upon termination. These rights include the payment of an employee’s final paychecks, severance pay and unemployment benefits.
Final Paycheck
In Colorado, employers are required to pay terminated employees their final paycheck by the next regular payday or within 10 days of termination, whichever is earlier. If the employee’s last pay cycle ended after the employee quit, the employer must pay the employee for the entire period within 6 days of termination, as long as the employee both requested a final paycheck and provided a valid address to send the final paycheck. If the employer does not pay for the entire period, the employee will be entitled to damages equal to 125% of the amount unpaid. Lost wages caused by a delay in payment may be collected in a separate civil action filed in district court.
Severance Pay
An employee has no legal right to severance pay unless an employment agreement provides severance pay. However, severance below the federal minimum wage could be considered a wage under the Colorado Wage Claim Act, which sets out certain statutory requirements for employers who wish to terminate employees. If severance is considered a wage, an employee would be entitled to a penalty of 125% of the amount of unclaimed severance.
Unemployment Benefits
Colorado requires certain employers to provide employees with unemployment benefits after the loss of their job. For an employee to qualify for unemployment benefits, the employee must have earned at least $2,500 during the highest quarter of the employee’s base period. The employee must additionally have been separated from employment under different conditions.
Notice Period & Severance Packages
Employers operating in Colorado are required to provide:
(1) advance notice of termination; or
(2) severance pay.
Under the Colorado Worker Adjustment and Retraining Act, an employer must generally provide 60 days advance written notice of certain work place mass layoffs and plant closures, as defined by the act. In lieu of providing the required notice, an employer can elect to pay the affected employee the equivalent of their pay for that period. (See C.R.S. § 8-14-102(4).)
There is no legal requirement in Colorado that obligates an employer to provide terminated employees with severance packages. However , many employers do offer severance packages to help protect against legal claims from terminated employees, to provide terminated employees with income while they undertake a job search, and as a means to avoid problems with the unemployment office, which will regularly push people on severance to repay what they received in severance before granting them unemployment benefits.
Dealing with a Termination Dispute
In the event of a termination dispute, parties may seek to resolve the matter through mediation if voluntary. Where this approach fails, either party may pursue legal action to adjudicate the matter.
Public agencies are required to adopt a local rule of procedure for adjudicating termination disputes. Such a procedure, however, is not required of private employees.
An employee alleging wrongful termination may file a general claim against his or her employer with the Department of Labor and Employment (CDLE). The CDLE will then review the claim and determine whether a private right of action exists in the case. If the CDLE determines that a private right of action exists, it will issue a right-to-sue letter to the aggrieved employee, who may then file a complaint in court alleging violation of the Colorado Wage Claim Act and/or the Colorado Wage Order. Alternatively, the aggrieved employee may sue his or her employer directly, without filing a claim first with the CDLE.
If a termination dispute is resolved through arbitration or a hearing, the Court of Appeals will uphold the decision unless given reason to overturn it.
Termination Law Changes & Trends
Recent changes in Colorado termination laws are shaping up in a few distinct ways. One area of change deals with the intersection of employee rights and drug use. For example, in January 2023, the Colorado Department of Labor and Employment adopted more rules about marijuana use by employees. Although the recreational use of marijuana was legalized in Colorado in 2012, an initiative that was passed in 2019 means that employers must now revisit and adapt their support and accommodation policies and procedures for current and future employees who are card-holders enabling them to use or possess marijuana. Now, Colorado law specifically prohibits employers from terminating an otherwise eligible employee because of the "presence of cannabinoids" (the psychoactive compound in marijuana) in their system (though employers may still terminate an employee who is actually under the influence of marijuana while on the job). Beyond this specific impact on employee rights, this policy direction seems to underscore that Colorado employers should consider offering leave and other similar benefits to their employees as soon as possible, to both avoid any legally problematic termination decisions and also, perhaps, to position themselves to be competitive with other employers.
Another key area of change deals with equity. According to a 2022 report by the Colorado Office of Economic Development and International Trade (OEDIT) and the Colorado Chamber of Commerce , there is evidence supporting that changes are needed regarding employee compensation and recruitment strategies. For example, as of 2022, Denver Business Journal reported that 60% of Colorado businesses who responded to a survey conducted by OEDIT in February 2022 indicated low compensation was limiting their ability to recruit new workers and retain their existing workforce (compared with just 32% as of September 2021). According to that same report, 30% of businesses polled said they are using pay increases to attract talent. Even larger companies are facing these pressures and challenges. For example, as the Colorado Springs Gazette has reported, the Employers Council recently conducted a poll of 367 companies in Colorado Springs: 47% of respondents indicated they plan to increase wages and/or enhance benefits to a significant degree, 31% said they are increasing wages but not significantly so, and others indicated they were not changing wages at all. Similar considerations are being raised outside the business community. For instance, last year, a Colorado Local News Network report noted that federal lawmakers were backing legislation to require that remote workers who live in Colorado but work remotely for out of state companies be paid the same as they would if they actually worked in-state.
