Use It or Lose It Vacation Policies Are Void.

The Colorado Supreme Court decided Nieto v. Clark’s Market on June 14, 2021. The Court found that earned and determinable vacation pay cannot be forfeited. Vacation or PTO time is considered wages under the Colorado Wage Claim Act and must be paid upon the employee’s separation from employment. This presents some tricky questions for employers. What if I have a use it or lose it vacation or PTO policy? In short, such policies are void under Colorado law. What happens if I allow employees to carry over vacation time from one year to the next? This is still allowed, but there are practical considerations employers should consider, including how much time may be carried over, what to do about amounts in excess of a carry-over limit, and when such amounts should be paid. All Colorado employers should take a hard look at their vacation or PTO policies and should work with qualified counsel to ensure compliance. Wells Anderson & Race LLC has a team of experienced employment lawyers who can assist with these and many other employment law questions. Please contact Katie Pratt at kpratt@warllc.com for more information.