Colorado Labor Peace Act HB26-1005: Small Business Guide

You have a 12-person landscaping company in Denver. A majority of your crew votes to unionize. Under current Colorado law, that vote doesn’t automatically trigger mandatory dues deductions—there’s a second hurdle. HB26-1005, the “Worker Protection Collective Bargaining” bill, passed the Colorado Senate 23-12 on May 1, 2026, and if signed, that second hurdle disappears. Here’s what that means for your payroll systems, your labor attorney relationship, and your planning calendar.

What the Colorado Labor Peace Act Actually Does

The Colorado Labor Peace Act, codified in C.R.S. § 8-3-101 et seq., has governed private-sector unionization in Colorado since 1943. Colorado is not a right-to-work state, but it carved out a distinctive middle ground: workers can unionize by simple majority, yet implementing a union security clause—one that requires all employees to pay dues as a condition of employment—demands a separate second election with a 75% supermajority approval.

That 75% threshold is the buffer. It means that even in a fully unionized workplace, three-quarters of the workforce must affirmatively vote to make dues payment mandatory before you as an employer are required to implement payroll deductions for union fees.

This two-vote structure is why Colorado currently has the lowest private-sector unionization rate among non-right-to-work states. The bar for mandatory dues is genuinely high.

What HB26-1005 Changes—and What It Doesn’t

The bill makes three material changes to the existing framework:

1. Eliminates the second election entirely. If HB26-1005 becomes law, a union that wins a simple majority representation vote can immediately negotiate a union security agreement. No separate ballot, no 75% threshold. From a payroll standpoint, this compresses the timeline from two election cycles to one.

2. Reinforces expanded bargaining rights. The bill explicitly expands employees’ rights to bargain on any mandatory subject—wages, hours, working conditions. While the National Labor Relations Act already covers these at the federal level, HB26-1005 removes state-level procedural friction unique to Colorado.

3. Clarifies good-faith bargaining protections. Employers can reject union proposals on mandatory subjects without committing an unfair labor practice, as long as genuine good-faith bargaining occurred. That’s a meaningful protection for small businesses worried about being compelled to accept specific contract terms.

What doesn’t change: federal NLRA protections still apply. The initial unionization vote still requires only a simple majority. And you still retain the right to legal counsel during negotiations.

The Failed Small-Business Exemptions

During the legislative process, amendments were proposed that would have exempted businesses with fewer than 50 employees, companies under 10 years old, and firms with less than $10 million in annual revenue. All three failed.

This matters because the practical burden of setting up union dues payroll deductions falls disproportionately on smaller employers. A 200-person manufacturer likely has an HR department and payroll infrastructure that can absorb the change. A 15-person HVAC company running payroll on QuickBooks Desktop does not have the same administrative runway.

If you’re in that second category, your planning window—between now and any gubernatorial signature—is your best opportunity to audit your payroll setup and identify what would need to change.

Why Governor Polis Vetoed the 2025 Version

Governor Polis vetoed a substantially similar Worker Protection Act in 2025, citing two concerns: insufficient consensus between business and labor groups, and the economic risk of accelerating unionization requirements during a period of small-business strain. HB26-1005 addresses neither concern substantively—the same business coalition opposition exists, and the exemptions that might have narrowed the economic impact were stripped out.

That said, the political context of 2026 differs from 2025. Whether the governor signs, vetoes, or allows the bill to become law without signature is genuinely uncertain at the time of this writing. Plan for both scenarios.

Practical Steps for Small Business Owners and Their CPAs

Regardless of the governor’s decision, this bill signals where Colorado labor law is heading. Here’s what to do now:

Review your payroll setup. Can your current system handle union dues deductions as a payroll line item? QuickBooks Desktop, for example, supports custom payroll deductions, but the configuration must be done correctly to ensure accurate tax treatment and accurate W-2 reporting. Test it before you need it.

Talk to a Colorado labor attorney. Good-faith bargaining is now a specific legal standard under the bill. Knowing what that standard requires—and documenting your negotiation process—protects you if a union later alleges an unfair labor practice.

Audit your employee classifications. Union security clauses apply to bargaining unit employees. If you have a mix of W-2 employees and 1099 contractors, make sure those classifications are defensible under IRS and state standards before a union certification creates scrutiny. For IRS guidance on worker classification, IRS is the authoritative starting point.

Update your HR documentation. Onboarding materials, employee handbooks, and offer letters should be reviewed by counsel if this bill becomes law. Language about dues obligations will need to reflect the new reality.

Brief your bookkeeper or staff accountant. If you use a fractional bookkeeper or outside accountant, they need to know about potential changes to payroll deductions before the obligation arrives—not after the first payroll run following a union vote.

How Sagenext Helps

Accountants advising small Colorado businesses on HB26-1005 compliance—payroll restructuring, multi-entity tracking, union dues deduction setup—need their software accessible and fast, without IT overhead eating into billable hours.

Sagenext hosts QuickBooks Desktop, QuickBooks Enterprise, Sage 50, Sage 100, and a full suite of tax applications including Drake, Lacerte, ProSeries, and UltraTax on fully managed cloud infrastructure. Your team accesses everything through a remote desktop session—no local installs, no version conflicts, no server to maintain. Backups, security, and updates are handled. If you’re picking up new Colorado compliance work mid-year and need to onboard a client’s QuickBooks file quickly, shows how the free trial works with no credit card required.

For a 10-person CPA firm, that means your staff can pull up a client’s payroll records from anywhere during a labor negotiation crunch—which is exactly when you don’t want to be troubleshooting a VPN.

Frequently Asked Questions

Does HB26-1005 apply to businesses with fewer than 15 employees?

Yes. Proposed amendments that would have exempted small businesses—those under 50 employees, under 10 years old, or under $10 million in revenue—were all rejected during the legislative process. As written, HB26-1005 applies to all private-sector employers covered by the Colorado Labor Peace Act regardless of size, which makes payroll preparation equally urgent for micro-employers and mid-sized businesses alike.

What is a union security agreement, and when does it affect my payroll?

A union security agreement is a contract clause requiring all bargaining unit employees to pay union dues or equivalent fees as a condition of continued employment. Under current Colorado law, this requires a separate 75% supermajority vote. If HB26-1005 becomes law, a union can negotiate this clause immediately after winning the initial majority vote—potentially triggering a payroll deduction obligation within weeks of unionization rather than after a second election.

What does ‘good-faith bargaining’ mean under the bill, and how do I prove it?

Good-faith bargaining means meeting at reasonable times, exchanging proposals, and genuinely trying to reach agreement—even if you never do. The bill explicitly states that rejecting a union proposal is not an unfair labor practice as long as good faith was present. Document every negotiation session: who attended, what proposals were exchanged, and what counteroffers you made. That paper trail is your defense if a union files an unfair labor practice charge.

Can I set up union dues payroll deductions in QuickBooks Desktop?

Yes. QuickBooks Desktop supports custom payroll deduction items that can be mapped to the correct liability accounts. You’ll want to configure the deduction as a post-tax item (union dues are generally not pre-tax for income tax purposes), set up the corresponding payroll liability account, and establish a remittance schedule to the union. Work with your accountant to confirm the tax treatment before you run the first paycheck with the deduction active.

Should I wait for Governor Polis to sign before making any changes?

No. The governor vetoed a nearly identical bill in 2025, so a second veto is plausible—but so is a signature. Use the uncertainty window to audit your payroll setup and brief your labor attorney. Preparation costs you a few hours. Being unprepared when an obligation becomes effective costs you much more. The Internal Revenue Service’s IRS 2000 Direct Deposit 2026 guidance on payroll tax deposits is worth reviewing regardless of how the bill resolves.

Key Takeaways

• HB26-1005 passed the Colorado Senate 23-12 on May 1, 2026, and eliminates the 75% supermajority second election requirement for union security agreements under the Colorado Labor Peace Act
• If signed, a union winning a simple majority vote can immediately negotiate mandatory dues deductions—compressing what was a two-election process into one
• All proposed small-business exemptions (under 50 employees, under 10 years old, under $10M revenue) were rejected, meaning no size-based safe harbor exists
• Governor Polis vetoed a nearly identical bill in 2025; the outcome of HB26-1005 is genuinely uncertain, making scenario planning the right posture
• CPAs advising Colorado clients should audit payroll systems now—specifically whether QuickBooks or other platforms are configured to handle union dues as a post-tax deduction line item
• Document every negotiation interaction: good-faith bargaining is now a defined legal standard, and your records are your best protection against unfair labor practice claims