Matt Purushotham
Thu, 07/08/2021
Employers in Colorado are prohibited from making vacation pay “use-it-or-lose-it” according to a Colorado Supreme Court decision issued on June 14, 2021. In Nieto v. Clark’s Market, the Court ruled that the Colorado Wage Claim Act (CWCA) prohibited employers who provide vacation pay from forcing employees to forfeit their accrued vacation pay, even when employment agreements or employer policies provide that such leave will not be paid out upon separation.
The case at issue in Nieto involved an employee, Carmen Nieto, who worked for a company, CMI, for eight-and-a-half years before being terminated. During her years of employment with CMI she accrued 136 hours of unused paid vacation worth $2,244.00, in accordance with CMI’s employee handbook. The employee handbook also provided that discharged employees would forfeit all earned vacation pay benefits. Therefore, when CMI terminated Ms. Nieto’s employment, it did not pay her out for her accrued vacation pay.
Interpreting the CWCA, its purpose, and its legislative history, the Court found that the statute’s requirement that employers “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” prohibited employers’ implementation of use-it-or-lose-it vacation policies.
The Court rejected CMI’s argument that an agreement between the employer and an employee could override the CWCA’s requirements based on the statutory language “in accordance with the terms of any agreement between the employer and the employee.” The Supreme Court found that this phrase applied only to the way employees earned vacation pay (“in accordance with” employment agreements or employer policies), not whether employers had to pay out such accrued pay upon separation. The Court found that the statute’s use of the word “shall” made mandatory employers’ obligation to pay out vacation pay upon separation. The Court also found that the legislature intended to prevent contractual waivers of employees’ right to vacation payouts.
The Court further concluded that the CWCA’s remedial purpose would be undermined if earned vacation leave could be forfeited through an employment agreement.
If you are a worker in Colorado whose employer has refused to pay out vacation pay accrued in accordance with an employment agreement or employer policy at the time of your separation from the employer, contact MSE at info@mselaborlaw.com.
