Court Opinions: Colorado Court of Appeals Opinions for June 15

Editor’s Note: Law Week Colorado edits court opinion summaries for style and, when necessary, length.

Brennan v. Broadmoor Hotel

The Colorado Court of Appeals unanimously affirmed in part and reversed in part a judgment involving tips and minimum wage.

According to the appeals court opinion, from 2013 to 2019 Broadmoor Hotel Inc. employed Rowean Brennan as a banquet server at The Broadmoor, a resort in Colorado Springs. The Broadmoor paid Brennan a base hourly wage of $2.17 plus a portion of the 22% service charge on food and drinks consumed at an event. The charge was paid as a single expense by the banquet client after the event. 

The appeals court wrote it’s undisputed that The Broadmoor told banquet clients it retained a portion of the service charge for administrative costs and passed the rest on to service staff. Banquet attendees infrequently left tips for banquet staff, which were passed through to them.

Brennan earned between $11.36 and $33.05 per hour during the relevant timeframe plus any passed through tips. 

In February 2019, Brennan filed a complaint with the Colorado Division of Labor Standards and Statistics in the Department of Labor and Employment. Brennan claimed he was a tipped employee under the Colorado Minimum Wage Order which established a distinct minimum wage for employees who regularly received more than $30 in tips per month. 

Brennan asserted he was owed the difference between his base hourly rate and tipped employee hourly rate ($6.28 in 2017; $7.18 in 2018; $8.08 in 2019). The division began an investigation of Brennan’s complaint, and, with his consent, expanded the investigation to include a potential failure to pay overtime. 

According to a footnote, Brennan’s base hourly wage and portion of the banquet service charge he received increased with the length of his employment. The service charge increased to 24% in 2018. A footnote added that although Brennan worked for The Broadmoor from 2013-2019, the division is only allowed to investigate complaints concerning wages earned in the two years before the complaint is filed. Brennan filed his complaint in February 2019, so the division could only investigate the alleged violations going back to February 2017.

The Broadmoor responded that Brennan wasn’t entitled to the tipped employee minimum wage because the banquet service charge wasn’t a tip and exempt from overtime pay under the commission sales exemption.

The division issued a citation to The Broadmoor for failing to pay Brennan the tipped employee minimum wage and overtime. It ordered The Broadmoor to pay Brennan $7,500 in wages (the statutory maximum) and $9,375 in penalties and $1,850 in fines to the division.

The Broadmoor appealed the division’s citation to a hearing officer, submitted documentation in support of its position and requested a hearing. The hearing officer conducted a hearing during which several of Broadmoor’s senior managers testified. 

The hearing officer reversed the division’s conclusion that Brennan was a tipped employee because the banquet service charge didn’t constitute a tip under the MWO. The undisputed evidence showed all banquet clients were assessed a mandatory fixed charge of 22% for food and drink consumed at the banquet, which they agreed to in advance by contract.

The hearing officer concluded this type of charge didn’t fit the customary definition of a tip as a payment that an individual customer voluntarily provides. The hearing officer determined The Broadmoor didn’t owe Brennan the difference between his base hourly wage and tipped employee minimum wage.

The hearing officer, however, affirmed the division’s conclusion Brennan was owed overtime. The officer rejected the idea Brennan was exempt from overtime pay under the MWO’s commission sales exemption. 

The hearing officer interpreted the term “sales employee” in the exemption to mean someone employed for the purpose of making sales. They found Brennan didn’t make sales and wasn’t employed for the purpose of making sales. The hearing officer otherwise affirmed the division’s imposition of penalties and fines.

Brennan appealed the hearing officer’s conclusion he wasn’t a tipped employee and wasn’t entitled to the difference between his base hourly wage and tipped employee minimum wage. The Broadmoor cross-appealed the hearing officer’s conclusion Brennan wasn’t exempt from overtime pay and thus was owed overtime wages. The division opposed both appeals and asked the hearing officer’s order be affirmed in its entirety.

The district court consolidated the appeals and affirmed the hearing officer’s conclusion in full.

The Broadmoor appealed the court’s conclusion that Brennan wasn’t exempt from overtime pay and Brennan cross-appealed the court’s conclusion he isn’t a tipped employee. The division opposed both appeals and asked the Colorado Court of Appeals to affirm the hearing officer’s order.

The appeals court concluded the hearing officer reasonably concluded a service charge for food and drink consumed during a banquet doesn’t constitute a tip under MWO because banquet clients cannot decide whether or how much to pay under a service charge. The appeals court concluded the banquet server isn’t a sales employee under MWO because a banquet server isn’t employed to make sales.

The appeals court affirmed the Department of Labor and Employment’s order awarding wages and penalties to a former banquet server for the employer’s failure to pay overtime, but reversed the imposition of a fine finding the employer had good faith legal justifications for withholding payment. 

Tremitek, LLC v. Resilience Code, LLC et al.

The Colorado Court of Appeals unanimously reversed a judgment and remanded a case involving a landlord.

According to the appeals court opinion, landlord Tremitek, LLC sued Resilience Code, LLC and Chad Prusmack (collectively the tenant) after the tenant stopped paying rent three years into a 10-year lease. Even though there was seven years left on the lease at the time of default, the district court awarded the landlord only five months of rent after finding the landlord could have sold the property in that time, the opinion said.

The lease contained a liquidated damages provision which provided that upon tenant default, the landlord could elect to accelerate rent and recover “the then present value of rent and other sums” payable under the lease’s remaining term, discounted at a rate of 10% per annum. The district court concluded the liquidated damages award was unenforceable.

The landlord appealed on multiple grounds, arguing the district court erred by refusing to enforce the liquidated damages provision in the lease and by requiring the landlord to sell the property as part of its duty to mitigate damages.

The appeals court explained that because the landlord had no duty to sell its property to remedy the tenant’s breach, its failure to make reasonable efforts to do so couldn’t violate its duty to mitigate.

The appeals court held the liquidated damages provision in the lease was unenforceable to the extent it allowed the landlord to recover the full amount of unpaid rent without deducting the reasonable rental value of the property for the remaining lease term.

The appeals court remanded the case to district court to recalculate damages by determining whether the landlord exercised reasonable efforts to re-lease the property and, if not, calculating the amount the landlord could have received if it had done so; and award damages accounting for the difference between that amount and the amount of unpaid rent due under the lease. 

Estate of Liebe

The Colorado Court of Appeals unanimously affirmed an order regarding a gift of a vehicle.

Leonard Liebe Sr. was 68 years old when he was hospitalized with COVID-19 in December 2021. While in intensive care Liebe called Myranda Hunter, who he treated as his adoptive daughter, and told her he wanted her to have his 2021 Ford Bronco.

Liebe arranged a video call with Hunter and her husband, Chelsea Ducray, his daughter and personal representative of his estate and his employee John Edwards. During the video call, Liebe effectively repeated his intent to give the Bronco to Hunter by informing Ducray why he wasn’t gifting it to her.

Liebe died without a will Jan. 1, 2022. In probate proceedings, Ducray refused to transfer title to the Bronco to Hunter so Hunter asked the district court to order Ducray to do so. 

After a May 2022 hearing on the matter, the district court ordered Ducray to sign the title to the Bronco over to Hunter and later entered a corresponding written order Sept. 1, 2022.

Ducray appealed the district court’s order. Ducray contended because Liebe never transferred title to the Bronco as required to complete a gift, the district court erred in recognizing the gift to Hunter.

The Colorado Court of Appeals relied on a line of cases in the state holding that a certificate of title isn’t necessary to determine ownership of a vehicle and concluded the the transfer of title isn’t required to effectuate the gift of a vehicle. 

The appeals court noted that holding otherwise would add an element to the inter vivos gift test the Colorado appellate courts haven’t traditionally required. 

The appeals court affirmed the holding of the district court.

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