Get access to the exclusive HR Resources you need to succeed in 2018.
Sign up for free email newsletters and get more SHRM content delivered to your inbox.
Is your employee handbook keeping up with the changing world of work? With SHRM's Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Build competencies, establish credibility and advance your career—while earning PDCs—at SHRM Seminars in 14 cities across the U.S. this fall.
Gain the skills you need to rise to the next level in your career. Jon us at SHRM's Leadership Development Forum, October 2-3 in Boston.
Members may download one copy of our sample forms and templates for your personal use within your organization. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices. Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRM’s permission. To request permission for specific items, click on the “reuse permissions” button on the page where you find the item.
Colorado employers with “use-it-or-lose-it” vacation policies; who cap the amount of vacation time that employees can carry over from year to year; or who do not pay out accrued vacation upon discharge, should review and possibly revise their vacation policies in light of recent changes to the state’s vacation pay enforcement position.
As part of its implementation of the new Colorado Wage Protection Act, the Colorado Division of Labor has announced, informally, a new enforcement position on vacation pay. The division interprets Colorado law to require that once vacation pay has been earned, it cannot be “unearned.” The division expressly prohibits any type of forfeiture clause in vacation agreements, including “use-it-or-lose-it” provisions.
Employers may cap vacation accrual, but once vacation time has been earned, it must be paid out upon separation from employment.
The division’s new policy applies only to vacation pay earned on and after Jan. 1, 2015. Additionally, the vacation pay rules do not apply to sick leave or to paid time off (PTO).
The division’s new policy is based on its interpretation of Colorado Revised Statutes (Section 8-4-101(14)(a)(III)), providing that wages include vacation pay “earned in accordance with the terms of any agreement.” The statute also states, “If an employer provides paid vacation for an employee, the employer shall pay upon separation from employment all vacation pay earned and determinable in accordance with the terms of any agreement between the employer and the employee.”
Some companies interpreted the statute to mean that payment of vacation pay upon separation of employment was not required in all cases. However, that interpretation now poses risks for employers in light of the division’s newly announced position.
Colorado employers are not required to provide any sort of paid vacation benefit. But if they do, and vacation pay is earned by an employee, it cannot be unearned and cannot be forfeited. As indicated, though, this is solely the division’s position in determining wage claims filed with it; this interpretation has not been adopted by any Colorado court at this time.
Even under the division’s new interpretation, employers can retain PTO use-it-or-lose-it policies and non-payment-on-discharge policies, provided they are drafted properly to exclude reference to vacation time.
All Colorado employers should review their vacation policies, procedures, and employment agreements and remove any provisions requiring forfeiture of earned vacation pay, among other things.
Ryan P. Lessmann and Kristen M. Baylis are attorneys in the Denver office of Jackson Lewis. Republished with permission. © 2015 Jackson Lewis. All rights reserved.
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Please sign in as a SHRM member before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
HR Professional Development Education in a City Near You
SHRM’s HR Vendor Directory contains over 10,000 companies