The Colorado Supreme Court recently clarified the applicable statute of limitations for wage claims in the State of Colorado.¹ In Hernandez v. Ray Domenico Farms, Inc., No. No. 17SA77, 2018 WL 1146468 (Colo. Mar. 5, 2018) (“Hernandez”), the court held that claims under Colorado’s Wage Claim Act (the “Wage Act”) must be brought within two or three years of when the wages first become due and payable, overruling several decisions that held terminated employees could make a claim for any unpaid wages earned during the entire course of their employment.

The decision turned on the correct statutory interplay of three sections of the Wage Act: Colo. Rev. Stat. § 8-4-103-1(a) (“Section 103”), Colo. Rev. Stat. § 8-4-109-1(a) (“Section 109”), and Colo. Rev. Stat. § 8-4-122 (“Section 122”). Section 122 contains the applicable statute of limitations for claims under the Wage Act, and it sets a time limit to bring a claim of “two years after the cause of action accrues and not after that time,” except for “willful violations,” which must “be commenced within three years . . . .” See Colo. Rev. Stat. § 8-4-122. Section 109, meanwhile, requires employers to pay earned but unpaid wages to terminated employees immediately or shortly after termination, while Section 103 requires employers to pay current employees their wages at regular intervals throughout employment.

Plaintiff’s argument was that claims brought under Section 109—the provision that governed wages due after termination—did not accrue until the employee had been terminated. Under this interpretation, an employee who had been terminated could sue for unpaid wages earned any number of years earlier, a result that for all intents and purposes vitiated the statute of limitations. For example, if an employer failed to pay an employee hired in 2000 his first paycheck, the employee would have to bring his claim within two or three years of that first paycheck under Section 103. But, if that same employee failed to bring a claim within three years and was terminated in 2018, the plaintiff’s claim for those same wages would be “revived,” because the claim re-accrued upon termination.  While this result would have made Colorado a true outlier in wage disputes, and there was no indication that the State legislature intended such a result, several courts had adopted this reasoning, holding that a terminated employee could have a claim under Section 109 of the Wage Act for unpaid wages earned more than two or three years before termination.²

Bringing Colorado in line with federal law and most other states with similar laws, the Colorado Supreme Court rejected the notion that Section 109 could breathe new life into stale claims. Instead, the court determined that a terminated employee may bring a claim under Section 109 for previously earned yet unpaid wages, but that the statute of limitations for those wages begins to run on the date the wages first became due and payable—not on the date of separation. So, for example, an employee terminated in 2017 could bring a claim under Section 109 for wages earned but unpaid in 2016, because that is within the two or three year statute of limitations—but not for wages earned but unpaid in 2012.

Hernandez thus brings some much-needed clarity and consistency to Colorado’s Wage Act. Employers should take comfort from the knowledge that they will not be exposed to potential claims involving facts from many years or even decades earlier under the Wage Act (for periods for which they are not even required to retain records), and all parties to wage disputes will benefit from the removal of significant ambiguity in this area of the law.