PTI Files Suit Against Unconstitutional State Family & Medical Leave Mandate

Lakewood, CO: Colorado’s paid family leave mandate involves an unconstitutional surcharge on

income, according to a suit filed today by the nonpartisan Public Trust Institute on

behalf of a Grand Junction small business.

The lawsuit details how Proposition 118, passed in 2020, creates a patchwork of tax surcharges that directly violate the state constitution’s prohibition on such surcharges.

Under Proposition 118, the state levies a “premium” paid by employers and measured as a percentage of each employee’s wages. However, the law creates a patchwork system for various types and sizes of businesses and is not applied uniformly to all wages or wage earners in the state. It treats employees differently based on the size of the company they work for, lets government workers off the hook entirely, and doesn’t touch wages above about $143,000. Article X, section 20(8)(a) of the state Constitution, however, generally requires “all taxable net income to be taxed at one rate...with no added tax or surcharge.”

“This is just an income tax by another name. The state constitution is clear that if government wants to fund a new program by taxing wages, it has to treat everyone the same, no matter how attractive the aims of that program might be,” said PTI Legal Director Dan Burrows. “PTI is standing up for the rule of law and the small businesses that are harmed by this unconstitutional taxing scheme.”

PTI filed suit on behalf of Chronos Builders, LLC, based in Grand
Junction. Garrett Davis, co-owner of Chronos Builders, said his company has worked with employees and provided leave for circumstances covered by Proposition 118 — but that the mandates and tax surcharges create needless bureaucracy and hamper the company’s ability to grow.

The law charges companies with under 10 employees half the tax surcharge, while companies that cross that threshold pay the full surcharge. Davis said that his company, which now has eight employees, is reluctant to add additional workers, even though it may be able to grow in the near future.

“We have always worked with individual employees to address their needs for leave for family or medical circumstances and we don’t charge them vacation time when they’re sick or have a family emergency,” Davis said. “This program is bad law and even worse economics because it hits us with an illegal tax to pay for something we’re already giving our employees free of charge. And if we grow, our costs for this program will automatically double. There’s a direct disincentive for us to create jobs.”