Colorado § 8-4-105 - Payroll deductions permitted - notice required.

§ 8-4-105. Payroll deductions permitted - notice required.

(1) An employer shall not make a deduction from the wages or compensation of an employee except as follows:

(a) Deductions mandated by or in accordance with local, state, or federal law including, but not limited to, deductions for taxes, "Federal Insurance Contributions Act" ("FICA") requirements, garnishments, or any other court-ordered deduction;

(a.5) Deductions for contributions attributable to automatic enrollment in an employee retirement plan, as defined in section 8-4-105.5, regardless of whether the plan is subject to the federal "Employee Retirement Income Security Act of 1974", as amended;

(b) Deductions for loans, advances, goods or services, and equipment or property, or any other thing that primarily benefits an employee, which does not include personal protective equipment, provided by an employer to an employee pursuant to a written agreement between such employer and employee, so long as it is enforceable and not in violation of law;

(c) Any deduction necessary to cover the replacement cost of a shortage due to theft by an employee if a report has been filed with the proper law enforcement agency in connection with such theft pending a final adjudication by a court of competent jurisdiction; except that, if the accused employee is found not guilty in a court action or if criminal charges related to such theft are not filed against the accused employee within ninety days after the filing of the report with the proper law enforcement agency, or such charges are dismissed, the accused employee shall be entitled to recover any amount wrongfully withheld plus interest. In the event an employer acts without good faith, in addition to the amount wrongfully withheld and legally proven to be due, the accused employee may be awarded an amount not to exceed treble the amount wrongfully withheld. In any such action the prevailing party shall be entitled to reasonable costs related to the recovery of such amount including attorney fees and court costs.

(d) Any deduction, not listed in paragraph (a), (a.5), (b), or (c) of this subsection (1), that is authorized by an employee if the authorization is revocable, including deductions for hospitalization and medical insurance, other insurance, savings plans, stock purchases, supplemental retirement plans, charities, and deposits to financial institutions;

(e) (I) A deduction for the amount of money or the value of property that the employee failed to properly pay or return to the employer in the case where a terminated employee was entrusted during the employee's employment with the collection, disbursement, or handling of such money or property, but only after providing notice of the deduction as specified in subsection (1)(e)(II) of this section.

(II) The employer has ten calendar days after the termination of employment to:

(A) Audit and adjust the accounts and property value of any items entrusted to the employee before the employee's wages or compensation shall be paid as provided in section 8-4-109. This is an exception to the pay requirements in section 8-4-109. The penalty provided in section 8-4-109 shall apply only from the date of demand made after the expiration of the ten-day period allowed for payment of the employee's wages or compensation.

(B) Provide notice to the employee that the employer is deducting from the employee's wages or compensation the amount of money or the value of property that the employee failed to properly pay or return to the employer, which notice must include a written accounting specifying the amount of money or the specific property that the employee failed to pay or return, the replacement value of the property, and, to the extent known, when the money or property was provided to the employee and when the employer believes the employee should have paid the money or returned the property to the employer.

(III) After an employer provides the notice required by subsection (1)(e)(II)(B) of this section and makes a deduction from the wages or compensation of an employee, if the employee, within fourteen days after the employer provides the notice, pays the money or returns the property that was the basis for the deduction, the employer shall pay the employee the amount of the deduction within fourteen days after the employee pays the money or returns the property to the employer.

(IV) If, after auditing and adjusting the accounts and property value of any items entrusted to the employee pursuant to subsection (1)(e)(II)(A) of this section and providing notice pursuant to subsection (1)(e)(II)(B) of this section, it is found that any money or property entrusted to the employee by the employer has not been properly paid or returned to the employer as provided by the terms of any agreement between the employer and the employee, the employee is not entitled to the benefit of payment pursuant to section 8-4-109, but the employee's claim for unpaid wages or compensation shall be disposed of as provided for by this article 4.

(2) Except for a deduction made in accordance with subsection (1)(a), (1)(a.5), or (1)(d) of this section, nothing in this section authorizes a deduction below the applicable minimum wage.

Source: L. 2003: Entire article amended with relocations, p. 1855, § 1, effective August 6. L. 2010: (1)(a.5) added and (1)(d) amended, (SB 10-035), ch. 3, p. 33, § 1, effective January 1, 2011. L. 2022: IP(1) and (1)(e) amended, (SB 22-161), ch. 370, p. 2627, § 6, effective January 1, 2023. L. 2025: (2) amended, (HB 25-1001), ch. 228, p. 1040, § 2, effective August 6. L. 2026: (1)(b) and (2) amended, (SB 26-160), ch. 339, p. 2059, § 2, effective June 3.

Editor's note: (1) This section is similar to former § 8-4-101 (7.5) as it existed prior to 2003, and the former § 8-4-105 was relocated to § 8-4-103.

(2) Section 4 of chapter 339 (SB 26-160), Session Laws of Colorado 2026, provides that the act changing this section applies to conduct occurring on or after June 3, 2026.

Cross references: For the "Federal Insurance Contributions Act", see 26 U.S.C. § 3101 et seq.; for the federal "Employee Retirement Income Security Act of 1974", see 29 U.S.C. § 1001 et seq.

ANNOTATION

An employer may not deduct its own costs of doing business from an employee's wages. A salon's cost of hair care products do not qualify as "goods or services" under subsection (1)(b). Thus, the salon unlawfully shifted its own costs of doing business to its employee by deducting the cost of the hair care products from her wages. 303 Beauty Bar v. Div. of Labor Standards, 2025 COA 20, 568 P.3d 43.

Parties' product fee deduction agreement was therefore unenforceable under subsection (1)(b) and § 8-4-121. A contract that reduces an employee's wages by shifting the employer's costs of doing business to the employee contravenes the legislature's manifest intent to prevent contractual waiver or modification of an employer's mandatory obligations under this act. 303 Beauty Bar v. Div. of Labor Standards, 2025 COA 20, 568 P.3d 43.