The Colorado Supreme Court ruled on Monday that Amazon’s incentive payments to employees for work performed on holidays must be part of overtime pay calculations under the state’s wage regulations.

The decision is a victory for Dan Hamilton, an Amazon worker who filed a class action lawsuit alleging the company improperly excluded holiday incentive pay and lowered employees’ overall compensation.

The case came to the Supreme Court through an unusual route. Hamilton pursued his claims in federal court, where a trial judge sided against him. But rather than answer the legal question itself, the federal appeals court based in Denver opted to ask the Supreme Court justices to take the first crack at interpreting Colorado law, after the appellate judges appeared to disagree about how to classify Amazon’s holiday incentive pay.

Amazon pays workers time-and-a-half to work on company holidays. However, the company omits that holiday incentive pay from its calculation of employees’ regular rate of pay. Essentially, the regular rate accounts for all hours worked and wages earned at various pay rates to establish an employee’s average compensation per hour — which is the number used to calculate overtime.

Omitting the more highly compensated holiday work has the effect of reducing workers’ overtime pay.

Under the state’s wage regulations, the regular rate includes “all compensation paid to an employee,” including “shift differentials.” However, pay for non-work hours, including “holiday pay,” is exempt.

Originally, U.S. District Court Chief Judge Philip A. Brimmer dismissed Hamilton’s lawsuit. He conceded holiday incentive pay was not the same thing as holiday pay, and Colorado’s wage law was silent about how to treat holiday incentive pay. Therefore, Amazon was allowed to follow federal law, which permits employers to exclude it from the calculation.

Hamilton appealed to the U.S. Court of Appeals for the 10th Circuit, where a three-judge panel acknowledged Colorado law can be more protective of workers than its federal counterpart. It was unclear, however, whether Colorado required holiday incentive pay to be part of the overtime calculation.

Multiple judges during oral argument appeared to believe it did, but for different reasons. Judge Harris L Hartz fixated specifically on the provision that shift differentials be included.

“Surely this is a shift differential, isn’t it?” he wondered. “I understand a shift differential to mean performing the same work, but you get compensated more because you’re doing it at an inconvenient time.”

Judge Nancy L. Moritz, meanwhile, focused on the requirement that the overtime calculation includes all compensation.

“You’re basically asking us to ignore the fact that the statute or the regulation says the regular rate includes all compensation,” she told Amazon’s lawyer.

Without the parties prompting them to do so, the 10th Circuit judges invoked a mechanism to ask the state Supreme Court for its interpretation of Colorado law. On Jan. 12, the panel formally invited the justices to answer whether Amazon needed to include holiday incentive pay in employees’ overtime calculations.

Before the Supreme Court, Amazon argued it was never clearly on notice of any need to incorporate holiday incentive pay.

“There’s no way an employer could look at this regulation and somehow know Colorado intended to deviate from federal law,” said the company’s attorney, Jennifer S. Harpole. “Colorado would be a one-off outlier. There is no other state where that has to be done right now.”

However, the Supreme Court felt otherwise. 

Justice Richard L. Gabriel, in the Sept. 9 opinion, wrote that Hartz and Moritz were both correct: Holiday incentive pay falls under the broad umbrella of “all compensation,” as well as the specific category of “shift differential.” The court also agreed with Brimmer that holiday incentive pay was not the same as holiday pay, which employees receive regardless of whether they work on company holidays.

“Finally, notwithstanding Amazon’s assertion to the contrary, we perceive no unfairness in enforcing the plain language of the applicable regulations, even though Amazon may have construed them differently than we do now,” Gabriel wrote.

The case now returns to the 10th Circuit, where the panel will likely revive Hamilton’s class action lawsuit.

Lawyers for Hamilton and Amazon did not immediately respond to requests for comment.

“This case reinforces the Colorado Supreme Court’s consistent conclusion that Colorado’s wage theft laws should be interpreted broadly to protect workers,” said David Seligman, executive director of Towards Justice, which submitted a supportive brief in the appeal.

The case is Hamilton v. Amazon.com Services LLC.