Colorado Says Vacation Pay Must Be Paid Upon Employee Separation

Colorado recently joined a growing list of states and localities that mandate employees must be paid the equivalent of their wages for earned-but-unused vacation days when an employee separates from employment. The decision was made by the Colorado Supreme Court in the case of Nieto v. Clark’s Market, Case No. 19S553 (Colo. Supreme Court June 14, 2021).

Most states do not mandate that employers provide paid vacation days, but many employers do anyway.  But, at the same time, many employers have policies that provide that any unused vacation days are forfeited when an employee either quits or is terminated. These are often called “use-it-or-lose-it” policies. Many states, like Illinois, Indiana and Louisiana, have banned these types of use-it-or-lose-it policies. And, now Colorado has joined the list. In states where use-it-or-lose-it policies are banned, employees are entitled to receive the equivalent of their wages for any accrued but unused paid vacation days in their final paycheck.

Banning use-it-or-lose-it policies is just and fair for employees since they have earned their vacation days. Employees have a right to be paid ALL of their earned wages and benefits — including paid vacation days. As an example, assume that an employer has voluntarily agreed to award one day of paid vacation for every four weeks of work. After about six months of work, the employee will have EARNED six vacation days. In states like Colorado, if the employee quits or is terminated, the employer is required to include the equivalent of the six days of wages in the employee’s final paycheck.

If you think that your employer has shorted you on your earned vacation days, you should seek consultation with an experienced employee rights attorney like the ones at Herrmann Law. You have rights that can be vindicated. Employers can be punished for violating wage and pay statutes.

In the Nieto case, the employee — Carmen Nieto — claimed that, at the time she was terminated, she had accumulated 136 hours of paid vacation time worth about $2,500 at her rate of pay. The employer did not have a typical use-it-or-lose-it policy. Rather, the employer had a policy that stated that earned-but-unused vacation days would only “vest” after about a year after the vacation days were earned. Vesting is a legal concept that establishes when an employee becomes entitled to be paid a benefit. The Colorado Supreme Court rejected the idea that an employer can impose a “vesting” criteria for when earned vacation days must be paid. The employee earned the paid vacation days pursuant to the policies put in place by the employer. As such, the paid vacation days were part of the employee’s earnings and compensation. Under the Colorado Wage Act, any earnings and/or compensation due when an employee quits or is terminated must be paid and must be included in the employee’s final paycheck. Under this principle, since unused earned vacation days were compensation, then the employer could not deem the vacation days forfeited. Colorado also mandated certain information be provided on earnings statements.

The Nieto decision is another “win” for employees.

Call the Employee Rights Attorneys at Herrmann Law Today

For more information, call the Employee Rights attorneys at Herrmann Law. If you think that your employer has violated your rights as an employee, call us. We are proven, experienced, employee-focused attorneys representing workers across the United States in all types of workplace disputes. Use our Online Contact page or call us at (817) 479-9229.

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