The “Keep Jobs In Colorado Act” Bad for Business, Bad for the State?

by Sherman & Howard L.L.C.

A new law currently being debated in Colorado's legislature could expose companies working on public projects to civil penalties if their workforce does not consist of at least 80% Colorado labor.  House Bill 1292, better known at the "Keep Jobs in Colorado Act," was originally drafted by the AFL-CIO and is sponsored by Representatives Sanford Lee and Dan Pabon in the House and Senators Andrew Kerr and Jeanne Nicholson in the Senate.  If passed, this bill will also raise costs for contractors who win public contracts because it requires enforcement of reciprocity requirements for non-resident bidders.   Just to be clear, the 80% Colorado labor and non-resident bidder reciprocity requirements already exist under Colorado law.  Currently, however, no state agency entity is tasked with enforcement of these requirements.  The new bill would give these requirements teeth by tasking state agencies with enforcing them and imposing civil penalties on contractors who fail to comply.[1]

For instance, the current version of the bill requires the Colorado Department of Labor to receive complaints about, investigate, and enforce violations of the 80% Colorado labor rule.  The CDL would be required to impose on contractors a $5,000 civil penalty for the first violation of the requirement.  The penalty for a second violation would be the lesser of $10,000 or 1% of the cost of the contract, and the penalty increases to the lesser of $25,000 or 1% of the cost of the contract for a third violation.  Three violations in five years could also result in a contractor's debarment. 

The non-resident bidder reciprocity requirement requires a percentage disadvantage to be applied to bids from companies whose home states give percentage bidding preferences to residents of that state.  The amount of the disadvantage would equal the amount of the percentage advantage in the home state.  Under the new law, the Colorado Department of Personnel would have to compile a list of states that give preferences to resident bidders, provide recommendations for enforcement of this provision, and enact rules necessary to implement the reciprocity requirement.

If enacted, this bill will likely raise costs for contractors and Colorado taxpayers because instead of hiring subcontractors and labor at the lowest cost, contractors will have to comply with the law's labor and reciprocity requirements.  Contractors will also have to bear increased administrative burdens and costs to ensure they are in compliance, and they face investigation and fines if they are not.  The bill has passed the Colorado House and Senate and is in the reconciliation process.  It will likely then proceed to the Governor's office for signature.  We encourage contractors and other companies that bid Colorado public projects to contact the Governor's office to voice their position on the bill. 

If you have questions or would like additional information regarding the bill, please contact attorneys in Sherman & Howard's Construction Law group.

[1]Proposed amendments to the bill allow a contractor to obtain a waiver of the 80% Colorado labor requirement, but only if it provides reasonable evidence to demonstrate insufficient Colorado labor to do the work.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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