303 Beauty Bar LLC v. Division of Labor Standards and Statistics.
2025 COA 20. No. 24CA0548. Labor and Industry—Wages—Permitted Payroll Deductions—Goods or Services.
February 20, 2025
303 Beauty Bar LLC (the salon) employed Buenger as a cosmetologist. The salon paid her wages and a commission based on her sales of services and retail products. The salon and Buenger also had a written agreement authorizing the salon to deduct from Buenger’s pay fees for hair care products that she used in providing services to the salon’s customers. Buenger filed a wage complaint with the Colorado Department of Labor and Employment’s Division of Labor Standards and Statistics (the division) asserting, among other things, that the salon did not pay her all the wages she earned in 2021 and 2022 due to its improper deduction of product fees. The division concluded that the products were primarily for the salon’s benefit, and CRS § 8-4-105(1)(b) did not authorize the salon to deduct its costs of doing business from Buenger’s wages. The division ordered the salon to pay Buenger $7,500 for unpaid wages and, based on its determination that the salon acted willfully, $22,500 in penalties. The salon administratively appealed, and an administrative law judge (ALJ) issued a written order concluding that the product fee deductions were impermissible under CRS § 8-4-105(1)(b). But the ALJ did not find that the salon acted willfully, and it reduced the penalties for improper deductions to $10,773.38. The district court affirmed the ALJ’s order.
On appeal, the salon argued that the division misapplied the law when it determined that the product fee deductions were improper. Section 8-4-105(1)(b) allows an employer to enter into a written agreement with an employee to deduct certain expenses from the employee’s pay, including deductions for “goods or services.” But such agreement may be unenforceable if it violates an employee’s rights under the Wage Act. Section 8-4-105(1)(b) is ambiguous with regard to what types of goods or services are allowable deductions and what types of deductions are unlawful, even if agreed to in writing. Analyzing the Wage Act and § 8-4-105(1)(b), the court of appeals concluded that an employer may not deduct its own costs of doing business from an employee’s wages. Here, the salon’s deductions shifted its own costs of doing business to Buenger, so the agreement to deduct product fees from Buenger’s pay was an unlawful waiver of her rights under the Wage Act. Accordingly, the division properly applied the law to conclude that the parties’ product fee deduction agreement is unenforceable.
The salon also argued that the Division relied in part on its published Interpretive Notice & Formal Opinion (INFO) #16: Deductions From, and Credits Towards, Employee Pay (last updated Dec. 23, 2022), which explicitly provides that when an employer makes deductions under § 8-4-105(1)(b), such deductions must benefit the employee and must not be for an employer’s cost of doing business. The salon maintained that the division’s reliance on INFO #16 violated the Colorado Constitution’s prohibition against retrospective legislation. However, as the salon conceded, INFO #16 is not law, and the division applied the Wage Act as it existed at the time the parties entered into their agreement.
The order was affirmed.