Colorado Vacation Pay Update

Sherman & Howard L.L.C.

Earlier this month, we alerted you that the Colorado Department of Labor was considering an enforcement position with respect to “use it or lose it” vacation policies. The CDOL recently issued a FAQ document about Colorado’s 2015 Wage Protection Act, which included 2 questions and answers about these policies. CDOL website with link to FAQ PDF

We don’t think these answers are clear, because while on the one hand they permit “use it or lose it” policies, on the other hand they state such policies can’t be used to deprive an employee of earned vacation time. The CDOL also indicated it will look at these policies on a case by case basis, and consider the following non-exhaustive list of factors: “The employer’s historical practices;” “Industry norms and standards;” “The subjective understandings of the employer and employee,” and “And any other factual considerations which may shed light on when vacation time becomes “earned” under the agreement in question.”

In light of this, we repeat our prior recommendation to review your vacation policies, and consider whether there are better alternatives to “use it or lose it,” such as capping the amount of vacation that can be earned, or substituting Paid Time Off (“PTO”) for vacation and sick pay. Prospective changes to policies are permissible, but changes that diminish vacation that has already been earned should be avoided.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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