It's not really clear what caused the problems you had after you got the car back. But if the shop did not put in the replacement engine as promised or did a shoddy job of it then it breached the contract you had and you may sue for that. In a breach of contract case, the damages you may claim are known as expectancy damages. This means you are entitled to get the amount of money it would take to put you back into the position you would have been had the contract been performed properly. In Colorado you may sue for up to $7,500 in small claims court.. The Colorado courts have a small claims page to help you get started.
Note that the shop cannot avoid liability here by claiming it knew nothing about it and that it must have been a side job by that now ex-employee. If that guy was an employee at the time and represented he was acting on behalf of the shop when he made the deal for the work then the shop is likely liable under the concept of apparent authority. You would want to sue both the shop and that employee to cover all your bases.