While many employees are taking time off over the summer, the Colorado Court of Appeals issued an employer-friendly ruling on vacation pay policies.
An employment agreement that says an employee forfeits their payout on unused vacation time when they’re fired, or when they quit without two weeks’ notice, doesn’t violate state wage law, the Colorado Court of Appeals ruled June 27. The division held that the Colorado Wage Claim Act doesn’t give employees the right to unused vacation time they accumulate during their employment, but rather that payout — and whether workers are entitled to it — is handled entirely by the employment agreement.
The decision in Clark’s Market v. Nieto gives HR and legal departments more assurance that they can place conditions on unused vacation pay under Colorado law, employment attorneys say.
The CWCA considers vacation time to be “wages” or “compensation” when it’s “earned” according to the terms of an employment agreement. The statute says that, when an employee leaves, their employer must pay out any “earned and determinable” vacation pay — also according to the terms of an agreement between the employ- er and employee. In the case before the Court of Appeals, a plaintiff tested how much leeway the statute gives these agreements in limiting vacation time payouts.