Hamilton v. Amazon.com Services LLC - Colorado Supreme Court Holds that Holiday Incentive Pay is Included in the Calculation of the Regular Rate of Pay for Overtime Purposes

AJ Carter, Associate

On September 9, 2024, the Colorado Supreme Court in Hamilton v. Amazon.com Services LLC[1] held that holiday incentive pay offered by an employer must be included in the calculation of the “regular rate of pay” when determining an employee’s overtime rate of pay. The ruling resolves a critical ambiguity under the law, highlights one of many material differences between federal and Colorado wage and hour laws, and serves as a reminder of the additional protections provided to employees under Colorado law versus the protections afforded under the Fair Labor Standards Act (“FLSA”).

Hamilton v. Amazon.com Services LLC – Background

Per Colorado’s Overtime and Minimum Pay Standards Order (“COMPS”), an employee’s “regular rate of pay” is, generally speaking, the hourly rate actually paid to an employee in any standard, non-overtime workweek, which may vary depending on whether the employee also receives other forms of pay for time worked in addition to hourly wages or salary (such as commissions, tip credits, shift differentials, etc.). Conversely, pay for hours not actually worked, such as vacation, sick leave, paid holidays, etc., are not factored into an employee’s regular rate of pay. As relevant to the Hamilton decision, holiday incentive pay is additional pay provided to an employee as an incentive/reward for working on federal or state holidays, but this particular category of pay is not expressly listed in the COMPS Order as either included or excluded from an employee’s regular rate of pay.

In Hamilton, plaintiff Dan Hamilton claimed that Amazon violated the Colorado Wage Act by not including holiday incentive pay in his overtime calculations. Hamilton argued that holiday incentive pay should be included in the overtime rate calculation, as Colorado law requires employers to include all pay received for work performed in the regular rate of pay. Amazon moved to dismiss the case, arguing that holiday incentive pay could be excluded under the FLSA. The federal district court sided with Amazon, finding that its exclusion of holiday incentive pay complied with the FLSA and, since Colorado law was silent on the issue, Amazon’s practice did not violate state law.

Hamilton appealed to the Tenth Circuit, which certified the question to the Colorado Supreme Court to determine if Colorado law requires holiday incentive pay to be included in an employee’s regular rate of pay for purposes of overtime calculations. Hamilton argued that holiday incentive pay should be included because it constitutes compensation for hours worked and is akin to a shift differential, which is explicitly included in the COMPS Order. Amazon, on the other hand, argued that holiday incentive pay should be excluded, citing both the absence of any discussion of holiday incentive pay in the COMPS Order and federal law under FLSA, which permits such exclusions.

The Colorado Supreme Court ultimately held in favor of Hamilton, and conclusively determined that holiday incentive pay must be included when calculating an employee’s regular rate of pay. The Court stated that the COMPS Order unambiguously requires all compensation for work performed to be included in the regular rate of pay calculation, and that holiday incentive pay is in essence a shift differential, which is intended to compensate employees for working undesirable hours, such as holidays. Furthermore, the court rejected Amazon’s reliance on the FLSA, noting that the FLSA acts as the “floor” for wage and hour protections in Colorado, and that Colorado law can (and often does) provide employees greater wage and hour protections than federal law. As a result, the Court held that holiday incentive pay must be included in the regular rate of pay calculation for overtime.

 Employer Considerations

  The Colorado Supreme Court’s ruling in Hamilton is a salient reminder to Colorado employers that even perfect compliance with federal wage and hour laws is, more often than not, insufficient to avoid wage and hour liability in this state. In light of the Hamilton Court’s unambiguous stance on holiday incentive pay, employers should revisit their payroll practices and, if they choose to provide employees with holiday incentive pay, they should ensure that such pay is factored into the regular rate of pay for purposes of any overtime owed. Penalties for noncompliance with Colorado’s wage and hour laws are severe, and may include mandatory penalties, fines, and payment of a prevailing plaintiff’s reasonable attorneys’ fees and costs. Campbell Litigation is available to assist employers with these and other wage and hour questions under Colorado and federal law

[1] Hamilton v. Amazon.com Services LLC, 2024 CO 60, 555 P.3d 620 (Colo. 2024).