Common Compliance Challenges for Small Businesses in Denver

Employment laws are complex, and they can change frequently. When you are a small-business owner, it can be challenging to stay on top of the law to ensure your company is in compliance while juggling everything else on your to-do list. However, non-compliance penalties are severe and could put your company’s reputation and growth at risk. At Ragab Law Firm, P.C., our team is here to help ensure you understand what’s required of you legally as an employer and help you handle any issues or disputes that may arise. Below is a list of some common compliance challenges we see for small businesses and how you can ensure you are following the law.

Minimum Wage Requirements

Small businesses that rely on hourly employees need to be aware of the applicable minimum wage requirements. There are federal, state, and city minimum wages to be mindful of in Denver. While the federal minimum is $7.25 an hour, as of 2025, the Colorado minimum wage is significantly higher at $14.81. However, most businesses in Denver must pay at least the minimum wage set by the city, which is $18.81. There are also specific requirements for tipped positions, which can complicate staying in compliance. You could face significant fines if your business violates the minimum wage requirements.

Independent Contractor vs. Employee Status

Many small businesses choose to partner with independent contractors to avoid having to pay benefits to full-time employees and to simplify bookkeeping. However, it is essential to ensure that you are correctly classifying any employees or contractors to avoid potential tax penalties and legal action. An independent contractor is generally not required to work for just your company, and they are usually paid based on the project with a contract rate instead of by the hour. They also maintain control of key aspects, such as their schedule and work methods.

If you require someone to be at your business between certain times, provide them with training, or pay them an hourly wage, they will likely be classified as employees instead of contractors. If you are not sure how someone should be classified or how to ensure you are properly accounting for taxes and other withholdings, an employment law attorney can help.

Anti-Discrimination Laws and Practices

There are federal laws that prohibit discrimination of employees based on specific protected classes. These include race, religion, color, nationality, age, disability, genetic information, and sex. The latter also encompasses any discriminatory practices based on sexual orientation, gender identity, or pregnancy. It is also illegal for employers to retaliate against an employee who has filed a discrimination complaint.

All businesses must ensure that their practices, including hiring, promoting, and terminating employees, comply with the anti-discrimination laws. Violating any of these laws, even if done unintentionally, can result in fines and potential lawsuits that could cause damage to your business’s reputation.

Paying Out Overtime

Employers are legally required to accurately track all hours their employees work if they are paid by the hour and eligible for overtime. Salary employees are generally exempt from overtime payments. Still, there can be some exceptions, so it is essential to work with an employment law attorney to ensure that you are correctly classifying and tracking each employee. If an employee works more than 12 hours in one day or works more than 40 hours a week, they are generally required to receive overtime pay at 1.5 times their usual rate for any additional hours worked. Colorado also has specific guidelines for when employees must be paid a higher holiday rate. Correctly classifying employees and maintaining accurate time records can ensure your business complies with these laws and avoid potential legal issues.

Lawful Terminations

Terminating an employee is never pleasant, but it is a necessary reality for small-business owners. Every person you hire is not going to work out, and you need to know what is legally required to ensure you are prepared when the time comes. Because Colorado is an at-will employment state, you can generally terminate an employee at any point without having to provide a reason — just as an employee is free to quit at any time. However, it is illegal to terminate someone as retaliation or based on discrimination.

There are also specific procedures that must be followed to ensure you comply with federal and state employment laws. This includes immediately issuing a final paycheck, for example. Depending on the position and your company’s policies, you may also be required to pay out unused vacation and paid time off (PTO). It is essential to keep records of employee performance and any disciplinary actions to protect you against any false allegations of discrimination. These can also help identify patterns in employees who weren’t a good fit or policies that need to be adjusted that can help you make better hiring decisions in the future.

Working With the Experienced Team at Ragab Law Firm, P.C.

When your business is on the line and the stakes are high, you need an employment law attorney who is well-versed in both state and federal regulations and can help ensure you are in compliance. At Ragab Law Firm, P.C., we work with clients in Denver and the surrounding area to address employment law compliance and other issues.

Small businesses are an integral part of Denver’s economy and culture, and we help you navigate legal challenges so you can focus on building your business. Call our office at 720-776-8853 to schedule a free case evaluation with a member of our team to find out more.