HB25-1208 and Potential Increases to Tip Credits for Local Minimum Wages
HB25-1208 and Potential Increases to Tip Credits for Local Minimum Wages
Rob Thomas, Of Counsel
Two weeks ago, the Rocky Mountain Employer discussed recent bills from the Colorado General Assembly proposing certain changes to paid family and medical leave laws in Colorado.[1] The General Assembly is now also considering a bill which would affect employers’ allowable tip credits in food and beverage-based industries where local minimum wages are higher than Colorado’s statewide minimum wage. If passed, House Bill 25-1208 (“HB25-1208”) would permit employers in localities with higher minimum wages to take concomitantly higher tip credits against such wages for employees who regularly and customarily receive tips as part of their income.
Tip Credits, Generally
In Colorado, the minimum wage an employer must pay is currently $14.81 per hour, which is more than double the minimum wage required under the federal Fair Labor Standards Act ($7.25/hour). Both Colorado and federal law allow employers to dip below minimum wage for employees who regularly and customarily receive tips as part of their job (restaurant servers, for example), so long as the employees’ combined earnings in wages and tips meet or exceed the applicable minimum wage. Notwithstanding that Colorado’s minimum wage is higher than federal minimum wage, the maximum tip credit allowed under Colorado law is lower than its federal counterpart—$3.02/hour versus $5.12/hour—and, therefore, Colorado’s $3.02 tip credit allowance applies to Colorado employers.
However, Colorado law also expressly permits local jurisdictions and municipalities to enact their own minimum wage laws which set higher minimum wages than those mandated statewide. The City and County of Denver currently has the highest locally-mandated minimum wage ($18.81/hour), followed closely by unincorporated portions of Boulder County ($16.57/hour), the City of Boulder ($15.57/hour), and the City of Edgewater ($16.52/hour). But, for these localities, the allowable tip credit for employers remains $3.02/hour, resulting in increased labor costs for service industry employers in such localities versus other Colorado employers in localities without their own minimum wage requirements.
HB25-1208 – Possible Relief for Certain Employers
HB25-1208, if passed, would provide some relief for employers with tipped employees in localities with significantly higher minimum wage requirements by permitting concomitant increases to allowable tip credits, thereby placing these employers on a more level playing field from a labor cost standpoint.
Specifically, the bill would require local governments with higher minimum wages (like Denver) to, by September 1, 2025, enact a code or ordinance as applicable that permits a tip offset for employees of food and beverage businesses (restaurants, bars, pubs, etc.) that equals the amount by which the local minimum wage exceeds the Colorado minimum wage, plus $3.02, and the ordinance would need to be effective by October 1, 2025.[2]
So, taking Denver as an example, the bill would require the City and County of Denver to pass an ordinance increasing the allowable tip credit in Denver by $4.00 (the difference between Denver’s $18.81/hour minimum wage and Colorado’s $14.81/hour minimum wage) to a total of $7.02/hour ($4.00 increase, plus the current $3.02 tip credit allowance under state law) which may be credited against an employee’s minimum wages in the food and beverage industry, assuming the employee otherwise qualifies for the tip credit. As a result of the bill, if it is passed, a Denver restaurant and a restaurant in a locality without an increased minimum wage would both have the same baseline minimum wage requirement for tipped employees once a tip credit is applied—$11.79/hour—whereas, currently, the Denver restaurant’s minimum wage obligations are significantly higher even after tip credits.
For subsequent years, HB25-1208 provides that after September 1, 2025 and before October 1, 2026, if a locality further increases its minimum wage, it must also implement a parallel increase in allowable tip credits, such that the minimum wage for tipped employees remains the same across the state after tip credits are applied. On and after October 1, 2026, local governments could adjust their own tip credit allowances as they see fit, subject to certain parameters. Specifically, a local government could not enact an ordinance that 1) decreases the amount of tip credits to an amount less than that permitted by state law (currently $3.02/hour); 2) decreases the amount of tip credits by more than fifty cents in any twelve-month period; or 3) increases tip credits by an amount that would allow an employee to be paid less than minimum wage, as adjusted by Colorado’s state-wide tip credit (i.e. less than $11.79/hour, currently).
Employer Considerations
HB25-1208 is an interesting attempt by the General Assembly to balance the need for employees in localities where the cost of living is particularly steep (like Denver and Boulder) to earn a living wage with the associated burdens caused by increased labor costs for service industry employers in the same localities—particularly locally-owned businesses.[3] On February 20, 2025, the bill passed, unamended, through the House Business Affairs & Labor Committee to the Committee on Finance, and time will tell if the bill continues to Governor Polis’s desk later this year. Campbell Litigation will continue to monitor the progress of this bill and other employment-related bills as the General Assembly’s Regular Session progresses.
[1]See https://www.rockymountainemployersblog.com/blog/2025/2/13/colorado-general-assembly-introduces-new-bills-relating-to-famli-benefit-durations-premium-amounts-and-job-reinstatement-rights.
[2] See https://leg.colorado.gov/sites/default/files/documents/2025A/bills/2025a_1208_01.pdf for the full text of HB25-1208.
[3] See https://www.axios.com/local/denver/2025/01/27/colorado-restaurant-industry-closures, reporting that 22% of restaurants within Denver have permanently closed within the past three years due to a combination of factors, including increased labor costs.