Today, and on the fourth Friday of each month, we will feature business insights from Kevin Welch, Founder and CEO of Journey Payroll & HR.

I have had the opportunity to spend time with Kevin discussing the current business climate, opportunities for growth, and how we address the barriers limiting the economic success of our region. The conversations -and the thoughtfulness behind his insights- have been powerful, and it is something we are excited to share with you, our membership.

We’ve given Kevin free range to write about what’s on his mind, so take the time to tune in and join the conversation. I find his observations, passion, and leadership incredibly valuable, and I invite you to follow along.

What Colorado Employers Need to Know About the PTO Recordkeeping Requirements Under COMPS Order #40

By Kevin Welch, CEO and Founder, Journey Payroll & HR | Published in the Colorado Chamber of Commerce

A Scenario That Is Playing Out Right Now

Picture this. A longtime employee comes to you with a question: “How many PTO hours do I have left?” You pull it up in your payroll system, she gets her answer, and everyone moves on with their day. Easy.

Now picture the same moment, except this time the question is coming from a CDLE investigator. Same employee. Same question. Except now the investigator is asking you to produce, in writing, every hour of vacation time that employee accrued, used and had available over the past two years.

If your payroll system is set up correctly, that report is a few clicks away and you have nothing to worry about. But if your leave tracking lives in a spreadsheet your office manager has been maintaining since 2019, or if your payroll system has PTO configured as a balance rather than a running accrual history, or if you have never actually run that report before, you have a gap. Not because you meant to do anything wrong, but because Colorado quietly raised the bar on what “keeping records” actually means, and a lot of employers did not notice.

What Changed on February 1, 2026

On February 1, 2026, the Colorado Department of Labor and Employment’s COMPS Order #40 took effect. Among its changes, the Order formally expanded Colorado employers’ recordkeeping obligations to include vacation and sick leave hours.

Here is the specific requirement: employers must now track and retain records for each employee showing vacation and PTO hours accrued, used and available, as well as HFWA (Healthy Families and Workplaces Act) sick leave hours accrued, used and available when tracked separately. Those records must be kept for a minimum of two years. And here is the part that catches employers off guard: employees can request those records at any time, and you must provide them in writing.

This is not a gray area. The CDLE’s own guidance, published in January 2026 alongside COMPS Order #40, spells it out directly: vacation pay hours constitute earned wages under Colorado law. That means your leave tracking is not just an HR housekeeping matter anymore. It is a wage record.

Why This Is Bigger Than It Looks

Colorado has long treated accrued vacation as earned compensation. That is not new. What is new is the formal codification of detailed, per-employee, hour-level recordkeeping as a specific compliance obligation under COMPS Order #40.

For employers who have been running lean, with a general sense of how much time employees are using but without a system that tracks accrual and balance at a granular level, this creates real exposure. If an employee files a wage claim and you cannot produce leave records, the CDLE is unlikely to give the employer the benefit of the doubt and may default to the employee’s version of events.

And the stakes for wage claims just went up. Under HB 25-1001, which took effect in August 2025, the CDLE’s jurisdiction for wage claims rose from $7,500 to $13,000 per employee, effective July 1, 2026, with the threshold indexed for inflation every two years beginning January 1, 2028, and the agency is now required to publish the names of employers found in violation on its website, a requirement that has been in place since 2017 and was reinforced under HB 25-1001. A recordkeeping gap that surfaces in a wage investigation is no longer just a fine. It is a reputational event.

Who This Applies To

Every Colorado employer. No size exemption. No employee count threshold. The HFWA, which COMPS Order #40 ties these recordkeeping obligations to, explicitly covers all public and private employers in Colorado, including sole proprietors with a single employee.

That includes employers who use a combined PTO policy that covers both vacation and sick time. A blanket PTO bank does not get you out of this. If your policy includes vacation time, it now needs to track accrual, usage and available balance at the employee level. The same applies to any sick leave that falls under HFWA coverage, which in most cases means all of it.

The Three Questions to Ask About Your Current System

Before you assume you are covered, walk through these three questions honestly.

• Can you produce a report, right now, that shows each employee’s vacation and PTO hours accrued, used and available over the past 24 months? Not a balance. A full accrual and usage history.
• Can you do the same for HFWA sick leave, tracked separately if your system separates it from vacation PTO?
• Can you provide that report to an employee in writing within a reasonable timeframe, because under Colorado law, they have the right to request it?

If the honest answer to any of those is “not easily” or “I’m not sure,” that is the gap to close. The requirement is already in effect. The clock started on February 1.

What Good Recordkeeping Looks Like

The good news is that most modern payroll and HR systems can handle this, and for employers already using a full-service payroll provider, the infrastructure to comply is likely already there. That said, some systems can be complicated to manage, and the configuration details matter.

Leave accrual may not be set up to track the full history, pay statements may not be surfacing balances in a way that satisfies the written record requirement, or a combined PTO policy may have been built around a simple balance rather than a running ledger. This is one of the areas where having a payroll partner like Journey Payroll & HR who knows Colorado’s requirements, and who manages that configuration on your behalf, makes a real difference.

A well-run payroll relationship means that report is always a few clicks away when someone asks for it, whether that someone is an employee or a CDLE investigator.

At a minimum, a compliant leave recordkeeping system should do the following.

• Track accrual for vacation, PTO and HFWA sick leave separately or in a clearly documented combined policy, with running balances by employee.
• Retain that data for at least two years, accessible and exportable.
• Allow employees to request and receive their leave records in writing, either through a self-service portal or upon request to HR or payroll.
• Reflect accurate balances on pay statements or make them available through another reliable written format.

If you are not sure whether your current setup meets these standards, that is worth a direct conversation with your payroll provider.

The Poster Requirement Still Applies Too

One more thing while we are here. COMPS Order #40 also updated the required CDLE workplace poster, which must be displayed where employees can easily see it, or provided directly to remote employees. If you haven’t updated your poster since February 1, that is another gap to close. The updated poster is available directly from the CDLE’s website.

Journey Payroll & HR clients receive free physical labor law posters and free electronic labor law posters with audit tracking as a standard part of their service, so staying current on poster requirements is one less thing to manage with the right payroll and HR partner.

The Bottom Line

Colorado has been methodically tightening its wage and leave compliance framework for years. COMPS Order #40 is another step in that direction, and the employers who get caught off guard are almost always the ones who assumed that “we’ve always handled it this way” was good enough.

Your PTO policy is now a wage record. Treat it like one. If you have not already reviewed your leave tracking system against the new requirements, now is the right time. The requirement is in effect, the agency has enforcement tools it did not have a year ago, and the exposure is real.

Our team at Journey Payroll & HR spends a lot of time talking to Colorado business owners who are doing their best to stay ahead of a regulatory environment that keeps moving. If you have questions about how this applies to your specific setup, even if you’re not a Journey client, please feel free to reach out to our team as a free resource. Our teams goal is to help.

Frequently Asked Questions

What are Colorado employers required to track under the new 2026 recordkeeping rules?

Under COMPS Order #40, effective February 1, 2026, Colorado employers must track and retain records showing each employee’s vacation and PTO hours accrued, used and available, as well as HFWA sick leave hours accrued, used and available when tracked separately. These records must be kept for a minimum of two years. Kevin Welch and the team at Journey Payroll & HR help Colorado employers review whether their current systems meet this standard.

Does the new Colorado PTO recordkeeping requirement apply to small businesses?

Yes. COMPS Order #40 applies to all Colorado employers regardless of size, including businesses with a single employee. There is no small business exemption for the leave recordkeeping obligation tied to the HFWA, which covers all public and private employers in the state.

Can employees request their PTO and sick leave records in Colorado?

Yes. Under Colorado’s HFWA and COMPS Order #40, employees have the right to request records showing their paid leave accrued, used and available. Employers must provide those records in writing upon request. Kevin Welch recommends that Colorado employers confirm their payroll or HR system can generate this report before an employee or CDLE investigator asks for it.

Does a combined PTO policy satisfy Colorado’s new sick leave recordkeeping requirements?

A combined PTO policy that covers both vacation and sick leave can satisfy HFWA requirements, but only if the policy meets HFWA’s accrual and usage standards and the employer tracks accrual and usage at the employee level. A general PTO balance without a detailed accrual history may not be sufficient under the new rules. Journey Payroll & HR can help Colorado employers assess whether their combined policy is structured correctly.

What happens if a Colorado employer cannot produce leave records during a CDLE investigation?

If an employer cannot produce documentation during a CDLE wage investigation, the agency may assume that the employee’s allegations are accurate and issue a citation based on that assumption. Colorado has required the CDLE to publish the names of employers found in violation since 2017. HB 25-1001 reinforced and expanded this requirement, adding that the CDLE must also disclose whether a violation was willful. Journey Payroll & HR works closely with trusted employment attorneys and is happy to make an introduction.

When did Colorado’s new leave recordkeeping requirements take effect?

The new leave recordkeeping requirements under COMPS Order #40 took effect February 1, 2026. If you have not reviewed your leave tracking system since that date, that review is overdue. Kevin Welch and the HR resources at Journey Payroll & HR are available to help Colorado employers identify and close any gaps.

About Kevin Welch

Kevin Welch is the CEO, Owner, and Founder of Journey Payroll & HR, a locally owned payroll and HR services company headquartered in Colorado. Kevin has a straightforward mission: give Colorado’s small and mid-sized businesses access to the same quality payroll, HR and compliance support that larger companies have always taken for granted.

Kevin has led Journey to being on the BizWest Mercury 100 list of Colorado’s fastest-growing companies 14 times, recognized as a Company to Watch from ColoradoBiz, and awarded the Torch Award for Ethics by the BBB.

Kevin writes on payroll compliance, HR strategy, workforce trends and the employment law changes that keep Colorado business owners up at night. He has a reputation for translating complicated regulatory and workforce topics into plain language that actually helps people make better decisions for their businesses and their teams.

To connect with Kevin or learn more about Journey Payroll & HR, visit
www.JourneyPayrollHR.com or connect with him on LinkedIn at
www.linkedin.com/in/kevinwelchjourney.

Chamber Colorado Monthly Articles | Kevin Welch, Journey Payroll & HR | JourneyPayrollHR.com