Employers should review their vacation policies to remove use-it-or-lose-it language as required under the Nieto decision. The CDLE’s new definition of “vacation pay” removes any question that PTO, or a similar policy by any other name, that can be used for vacation, is included within the definition of vacation pay and cannot be forfeited.
The proposed rule defines “vacation pay” as “pay for leave, regardless of its label, that is usable at the employee’s discretion (other than procedural requirements such as notice and approval of particular dates), rather than leave usable only upon occurrence of a qualifying event (for example, a medical need, caretaking requirement, bereavement, or holiday).” 7 C.C.R.17.1. On September 30, 2021, the CDLE ostensibly answered the question regarding use-it-or-lose-it policies for PTO in a proposed rule.
2021).Ī lingering question for employers-both before and after the Nieto decision-has been whether leave accrued under a Paid Time Off (“PTO”) policy that can be used for both vacation and other types of leave, including sick leave, is included within Colorado’s use-it-or-lose-it prohibition. Clark’s Market, ruling that employers must pay out an employee’s earned but unused vacation pay upon separation of employment and any handbook provision or agreement to the contrary is not enforceable. On June 14, 2021, the Colorado Supreme Court settled the debate, issuing its highly anticipated decision in Nieto v.
Until recently, there has been significant debate regarding whether Colorado’s statute prohibits so-called “use-it-or-lose-it” vacation policies. Colorado law has long defined “wages” and “compensation” as including “vacation pay earned in accordance with the terms of any agreement.” C.R.S. The Colorado Department of Labor and Employment (“CDLE”) recently issued several proposed rules, including new language defining “vacation pay” for purposes of Colorado’s wage laws.
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