A right-leaning Denver law firm has filed a lawsuit against the state challenging as unconstitutional the Paid Family and Medical Leave Insurance Program that voters approved last year.
The lawsuit, filed in Denver District Court, was done so on behalf of Chronos Builders LLC, a Grand Junction company that is partly owned by Mesa County Commissioner Cody Davis.
The firm that filed it, Public Trust Institute, claims that Proposition 118 assesses an unconstitutional surcharge, one that is not uniformly applied and is in violation of the Colorado Constitution.
“This is just an income tax by another name,” said Dan Burrows, legal director of the nonprofit institute, which describes itself as a liberty-minded public-interest law firm that defends individual freedoms and personal responsibilities.
“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,” Burrows added. “PTI is standing up for the rule of law and the small businesses that are harmed by this unconstitutional taxing scheme.”
Under the proposition, which nearly 58% of Colorado voters approved in November, the state is to create a special insurance program that all employers and employees are to pay into through a payroll premium.
Starting in January 2023, that premium is to vary depending on an employee’s weekly wages that their employers are required to match.
That money — it is expected to raise about $1.3 billion a year — would be used to pay qualifying employees a portion of their wages for up to 12 weeks when they need to take time off from work for family emergencies or medical needs.
Federal law already allows employees to take up to 12 weeks of time off, but employers are not required to pay wages for that time.
Burrows, however, said the proposition treats employers differently based on their size, doesn’t apply to government workers and caps wages above $143,000.
He said that the Colorado Constitution requires “all taxable net income to be taxed at one rate ... with no added tax or surcharge.”
The suit is filed on behalf of Chronos Builders, a Grand Junction boutique home builder that is owned by Davis and his brother, Garrett.
“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,” Garrett 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,” he added. “And if we grow, our costs for this program will automatically double. There a direct disincentive for us to create jobs.”
The proposition allows companies that have 10 or fewer employees to pay half the surcharge. Davis’ company currently employs eight people.
Cody Davis, who still has an ownership interest in the company but isn't involved in its day-to-day operations, said the new law could have the impact of hindering companies from hiring additional workers, and not only those that go above 10.
"We are standing up for small companies like ours and the people they employ," Cody Davis said. "This isn't good for either employee or employer. (It) stifles job creation just when our state really needs more people back to work."
The suit names the Colorado Treasurer’s Office and the Colorado Department of Labor and Employment’s newly created Division of Family and Medical Leave Insurance.
Public Trust Institute was the group that last year filed a successful ethics complaint against former governor now U.S. Sen. John Hickenlooper, and an unsuccessful ethics complaint against former state Rep. Joe Salazar. Both are Democrats.