This article addresses specific compliance issues around terminating employees in Colorado. If you'd like to know how to terminate an employee within Justworks, please visit Terminating Employees.
Final wage requirements
Colorado law requires that employees be paid their owed wages at the time of termination if termination is involuntary. If an employee resigns, then the final pay can be paid out with the next regular payroll, via direct deposit or otherwise.
Employers are not required to offer vacation benefits in Colorado, but if they choose to do so, they must pay out all unused, accrued vacation upon termination of employment. All vested vacation must be paid to the employee as wages, at the final rate of pay. A 2021 Colorado Supreme Court decision explicitly ruled that this requirement supersedes any internal company agreement or policy forfeiting earned vacation pay. As such, upon separation from employment, an employee is entitled to all unused and earned vacation regardless of whether an internal policy states otherwise.
For an involuntary termination, best practice is to provide employees with a physical check for all outstanding wages upon termination. It is possible to schedule this final check in advance to be paid via direct deposit on the termination date, but can be tricky for a variety of logistical reasons. All funds paid via physical check should be recorded in Justworks for tax purposes.
Required separation notice
Additionally, employers are required to provide employees with a notice to inform them of the availability of unemployment insurance upon separation, regardless of whether the termination is voluntary or involuntary. As of the date of publishing, the state has not provided a template, but the notice must include:
- a statement that unemployment insurance benefits are available to unemployed workers who meet the eligibility requirements of Colorado law
- contact information to file a claim
- information the individual will need to file a claim
- contact information to check on the status of a claim after it is filed
- employer’s name and address;
- employee’s name and address;
- employee’s ID number or the last four digits of their SSN;
- employee’s first and last dates worked, year-to-date earnings, and wages for the last week worked;
- reason for separation
CO Department of Labor and Employment: Final Pay
Mineral: Colorado Separation*
*Be sure you’re logged into your Justworks account with administrative permissions to access Mineral.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.