State Supreme Court Considers “Use-It-Or-Lose-It” Vacation Policies
Attorneys hope high court will clear up conflict between court rulings and CDLE guidance

by Jessica Folker
Colorado Supreme Court building

The Colorado Supreme Court will hear oral arguments today in a case that could bring much-needed clarity on whether “use-it-or-lose-it” vacation policies are allowed under state law.

The case, Nieto v. Clark’s Market, involves former grocery store employee Carmen Nieto, who claims she was entitled to pay for her unused vacation days upon her termination from Clark’s Market. However, the grocery chain denied Nieto the payout, pointing to a policy in its handbook that says employees “forfeit all earned vacation pay benefits” if they are dismissed for any reason or fail to give two weeks’ notice.

Nieto alleges the grocer’s forfeiture policy violates the Colorado Wage Claim Act, which says that when an employee is discharged, wages or compensation “earned, vested, determinable and unpaid at the time of such discharge” is due and payable immediately.

Under the CWCA, vacation pay is considered wages or compensation if “earned in accordance with the terms of any agreement” and if “earned and determinable in accordance with the terms of any agreement between the employer and the employee.”

Citing these provisions, Clark’s Market argues the plain language of the CWCA allows employers and employees to enter into agreements that determine when or if vacation time becomes “earned, vested or determinable.” Under its policy, Clark’s Market argues, Nieto’s vacation time didn’t vest or “become determinable” because she was terminated.

In June 2019, the Court of Appeals upheld a lower court’s decision siding with Clark’s Market. The court said in its opinion that Nieto’s right to vacation pay hinged on the employment agreement, which “unequivocally says the vacation pay she seeks wasn’t vested given the circumstances under which she left the Market’s employ.”

The employer-friendly decision was seen as a clear green light for “use-it-or-lose-it” vacation policies following years of what attorneys say had been confusing or conflicting guidance from the Colorado Department of Labor and Employment.


This complete article appears in the Nov. 9 issue of Law Week Colorado. To read other articles from that issue, order a copy online. Subscribers can request a digital PDF of the issue.