Employee Expense Reimbursement Laws in Colorado

Federal law provides minimal express requirements for expense reimbursement. The Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., establishes that employers must ensure employees receive at least the federal minimum wage (currently $7.25 per hour), but does not mandate reimbursement of work-related expenses.

However, the FLSA does prohibit deductions from wages that would reduce an employee's earnings below the minimum wage. This means that while federal law does not affirmatively require reimbursement of work expenses, it does prevent employers from deducting necessary business expenses from wages in a way that reduces pay below minimum wage.

The Internal Revenue Service (IRS) provides tax guidance on accountable plans under Internal Revenue Code section 162, which allows employers and employees tax-free reimbursement of ordinary and necessary business expenses. However, IRS rules do not create a legal obligation to reimburse; they simply provide tax treatment for voluntary reimbursement programs.

The Occupational Safety and Health Administration (OSHA) requires employers to provide personal protective equipment (PPE) at no cost to employees under 29 CFR 1910.132, which effectively mandates reimbursement or provision of safety equipment. The EEOC also requires employers to provide reasonable accommodations for disabled employees, which may include equipment costs, but this is a narrow category.

Colorado Revised Statutes section 8-4-103 explicitly requires employers to reimburse all necessary expenses incurred by employees in the discharge of their duties. This is significantly stronger than federal law, which contains no general expense reimbursement mandate.

Under Colorado law, an employer cannot require an employee to pay for any expense necessary to perform the job. This includes uniforms, tools, supplies, transportation, licenses, certifications, and other business-required expenditures. Colorado law treats such reimbursement as part of earned wages and subjects it to all wage protections under the Colorado Wage Payment Act.

Critically, Colorado Revised Statutes section 8-4-102 requires that the minimum wage (currently $15.00 per hour as of January 2024, adjusted annually) must be paid after all deductions and unreimbursed expenses. An employer cannot use expense reimbursement obligations to reduce the effective hourly wage below minimum wage. This means reimbursement is mandatory regardless of the employee's minimum wage status.

Colorado law applies to all employers, regardless of size. There is no exception for small businesses or independent contractors. The state law covers both in-state and out-of-state employers doing business in Colorado.

Under Colorado Revised Statutes section 8-4-104, employees who are not reimbursed for work-related expenses can file a wage claim with the Colorado Department of Labor and Employment (CDLE) within two years of when the expense was incurred. The CDLE can order the employer to pay the unreimbursed expenses plus penalties. This remedy is unique to Colorado and provides direct enforcement at the state level without requiring federal litigation.

Colorado law contains narrow exceptions and important limitations. First, expenses are not reimbursable if they are personal in nature rather than work-required. For example, an employee's personal hygiene items, clothing worn outside of work, or commuting costs for a standard work location are generally not reimbursable. However, specialized uniforms, safety equipment, and equipment specific to the job must be reimbursed.

Second, the expense must be truly necessary to perform the duties. This is a factual determination. If an employer provides reasonable alternatives (such as providing tools rather than requiring employees to purchase them), the employer may not be required to reimburse purchases employees make on their own initiative, though this remains contested territory.

Third, independent contractors are generally not covered by Colorado wage law, including expense reimbursement requirements, provided the misclassification is legitimate. Colorado applies the ABC test for independent contractor classification under Colorado Revised Statutes section 8-10-1001. This test requires that the worker be free from control, work outside the usual business, and work as an independently established trade. Many workers classified as independent contractors may actually be employees under this test.

Fourth, employees in certain professional categories may have different expectations. Salespeople, for example, are often treated differently, though Colorado law still requires reimbursement of necessary expenses even for commissioned employees.

Fifth, collective bargaining agreements may modify reimbursement terms if they provide equal or greater protections. An agreement cannot eliminate reimbursement rights but may specify different procedures or timelines.

Step 1 — Document Your Expenses Thoroughly: Keep detailed records of all work-related expenses, including dates, amounts, descriptions of what was purchased, and how the expense relates to your job. Maintain receipts, invoices, credit card statements, and mileage logs. Take photos of equipment purchased if helpful. Create a spreadsheet or document listing each expense with the date and business purpose. This documentation is essential because you will need to prove the expenses when filing a claim.

Step 2 — Make a Written Request to Your Employer: Before filing a formal claim, request reimbursement in writing. Send an email to your supervisor, manager, or HR department with a detailed list of unreimbursed expenses, the dates incurred, amounts, and business purpose. Include copies of receipts. Request reimbursement within a specific timeframe (typically 5-10 business days). This creates a record that you gave the employer notice and opportunity to comply. Keep a copy of your request and the response (or lack thereof).

Step 3 — File a Wage Claim with Colorado Department of Labor and Employment: If your employer does not reimburse within a reasonable time, you must file a wage claim. Visit the CDLE website at https://www.colorado.gov/dola/wage-claim-information or call 303-318-8000. You can file online, by mail, or in person. You have up to 2 years from the date the expense was incurred to file. The claim must include: (1) your name, address, and contact information, (2) your employer's name, address, and contact information, (3) dates of employment, (4) detailed description of each expense with dates and amounts, (5) copies of receipts or proof of payment, (6) explanation of business purpose, and (7) proof of your request to the employer. There is no filing fee.

Step 4 — Understand the Investigation and Resolution Process: After you file, the CDLE will conduct an investigation. This typically takes 30-90 days. The CDLE will contact your employer and request documentation. Your employer may respond with their own explanation. You may be asked to provide additional information or clarification. The CDLE investigator will evaluate whether the expenses were necessary to perform your job duties under Colorado law. If the CDLE determines the employer violated the reimbursement requirement, they will issue an Order of Restitution requiring the employer to pay the unreimbursed expenses plus applicable penalties and costs. Your employer has the right to appeal the decision within 20 days.

Step 5 — Consider Legal Representation: If the amount is substantial (over $2,000-$3,000), consult an employment attorney. An attorney can review your documentation, advise on strategy, and represent you in CDLE proceedings or in court if necessary. Many employment law firms work on contingency for wage claims. If you believe your employer retaliated against you for filing a wage claim, contact an attorney immediately, as Colorado Revised Statutes section 8-4-111 protects employees from retaliation.