Under Colorado expense reimbursement law, an employer must pay for the costs of doing business, and forcing an employee to absorb work-related expenses is treated as an unpaid wage. That means the same enforcement tools that apply to a missing paycheck, including written demands, state investigations, and multiplied damages, apply when your employer refuses to cover tools, mileage, required uniforms, or other job costs you paid out of pocket.
What Counts as a Reimbursable Business Expense
The Colorado Department of Labor and Employment treats several categories of costs as the employer’s responsibility:
- Tools, supplies, and equipment the employer requires for the job, including software licenses, safety gear, and specialized tools.
- Uniforms and special apparel required as a condition of employment, along with their maintenance and cleaning. Ordinary wear and tear cannot be deducted from wages.
- Business losses such as property damage or unpaid customer bills.
The test is who primarily benefits from the expense. If the employer requires it, the employer pays for it, even when the employee gets some incidental use out of the item. The CDLE has stated there is “no legal difference between deducting a cost directly from wages and shifting a cost, which they could not deduct, for the employee to bear.”1Colorado Department of Labor and Employment. INFO #16 Deductions From, and Credits Towards, Employee Pay A 2025 Colorado Court of Appeals decision reinforced the point, holding that a contract shifting the employer’s costs of doing business to the employee violates the Wage Act.
Remote Work Costs
When an employer requires an employee to work from home rather than offering it as an optional perk, costs the employee incurs to do that work can qualify as reimbursable. That includes upgraded internet service, a phone plan used for business calls, and equipment the employer would otherwise provide in an office. The CDLE expects employers to cover “necessary expenditures” directly related to the employee’s duties when remote work is mandatory.
Colorado law doesn’t prescribe a formula for splitting mixed-use costs like home internet, so the details usually come down to the employer’s written policy. If the employer has no policy at all and the employee is paying out of pocket for something the job requires, the CDLE will likely side with the employee.
Mileage for Personal Vehicle Use
Colorado law doesn’t set a per-mile rate, but the IRS standard mileage rate is a widely accepted benchmark. For 2026 that rate is 72.5 cents per mile for business driving, and it covers gas, insurance, depreciation, and maintenance in a single figure.2Internal Revenue Service. IRS Sets 2026 Business Standard Mileage Rate at 72.5 Cents Per Mile The rate applies equally to gas-powered, hybrid, and electric vehicles.
An employer can choose to reimburse actual vehicle costs instead, but the IRS method avoids arguments over receipts. What an employer cannot do is require driving and reimburse nothing. That shifts a business cost to the worker, which Colorado’s rule forbids.
What Employers Cannot Deduct or Shift
Under C.R.S. § 8-4-105, employers can only take deductions from wages in limited circumstances: deductions required by law such as taxes and garnishments, amounts authorized in a written agreement for loans or goods the employer provided, or replacement costs for theft backed by a police report.3Colorado Department of Labor and Employment. Colorado Wage Act 8-4-101 et seq. CRS Business expenses don’t fit any of those exceptions. Because the statute treats shifting a cost the same as deducting it, an employer who makes the employee pay for something in the required-tools or uniform category is running the same violation as if the cost had come straight out of the paycheck.
How to Demand Reimbursement
Recovery starts with a written demand for payment sent to the employer. It can go by mail, email, or even text message. The CDLE provides a standard demand form, but you can write your own. Identify the amount owed and the expenses at issue.
Sending the demand starts a 14-day clock. If the employer pays in full within 14 days, the matter ends. If the employer ignores the demand or pays only part of what’s owed, you become eligible for penalty damages on top of the underlying amount.4Colorado Department of Labor and Employment. Demand for Payment of Wages Instructions and Information
You have two forums for the underlying claim: a complaint filed with the Colorado Division of Labor Standards and Statistics, or a civil lawsuit. You don’t have to wait 14 days before filing the Division complaint; the demand and the complaint can go out at the same time. What the 14 days control is whether penalties get added.
Penalties When an Employer Refuses
The penalty structure under C.R.S. § 8-4-109 was strengthened effective January 1, 2023. If the employer fails to pay within 14 days of receiving the written demand, administrative claim, or civil action, the employer owes the unpaid amount plus automatic penalties:
- Standard penalty: the greater of two times the unpaid wages or $1,000.
- Willful violation penalty: the greater of three times the unpaid wages or $3,000.
The Division may also impose a fine of up to $50 per day for every day the employer fails to pay.4Colorado Department of Labor and Employment. Demand for Payment of Wages Instructions and Information
Willfulness doesn’t require malice. A violation is considered willful per se if the employer has failed to pay employees wages of the same type at least once before within the preceding five years, and evidence of a prior Division judgment or wage determination is admissible to prove willfulness.5Justia Law. Colorado Code 8-4-109 – Payment of Wages Repeat offenders land in the higher penalty tier almost automatically.
Deadline to File a Claim
You have two years from the date the reimbursement was due to file. If the employer’s failure was willful, the window extends to three years.6Justia Law. Colorado Code 8-4-122 – Statute of Limitations The Colorado Supreme Court confirmed in September 2025 that these periods apply to all wage claims in the state.
Tax Treatment of the Reimbursement
How the employer structures the reimbursement determines whether it shows up as taxable income on your W-2. The IRS recognizes two types of arrangements. Under an accountable plan, reimbursements are excluded from gross income and don’t appear in Box 1 of the W-2. To qualify, the arrangement must meet three requirements: the expense must have a business connection, the employee must substantiate the expense within a reasonable time, and any excess reimbursement must be returned within a reasonable time.7Internal Revenue Service. Publication 463 (2025), Travel, Gift, and Car Expenses The IRS treats 60 days after an expense is incurred as a reasonable substantiation window, and 120 days as a reasonable window for returning excess.
If the arrangement fails any of those tests, it’s a nonaccountable plan. The whole reimbursement gets folded into gross income, reported on the W-2, and hit with income tax withholding and employment taxes.7Internal Revenue Service. Publication 463 (2025), Travel, Gift, and Car Expenses The employee ends up paying tax on money that was only covering a business cost. If your employer’s process looks casual (no receipts required, flat monthly payments with no reconciliation), the plan may be nonaccountable, and it’s worth asking about.
Minimum Wage as a Federal Floor
The Fair Labor Standards Act doesn’t independently require expense reimbursement, but it prohibits employers from requiring employees to bear costs that push effective pay below the federal minimum wage of $7.25 per hour, and the same rule protects required overtime pay.8U.S. Department of Labor. Fact Sheet #16 – Deductions From Wages for Uniforms and Other Facilities Under the Fair Labor Standards Act Colorado’s 2026 minimum wage is $15.16 per hour, well above the federal number, so the state figure is the binding floor for most workers.9U.S. Department of Labor. State Minimum Wage Laws For higher-paid employees the minimum wage math rarely matters, but Colorado’s broader prohibition against shifting business costs still applies. An employer can’t skip the reimbursement obligation just because the employee earns enough to absorb the cost.