Colorado Supreme Court holds vacation is a wage due in final paycheck

As noted previously, litigation over vacation payouts has been on-going at the trial court level then the appellate courts, and now finally the Colorado Supreme Court. The issue has been whether, despite various statutory changes to Colorado’s wage laws, vacation is a “wage” that must be paid out in the employee’s final paycheck. More specifically the issue has been whether employers can lawfully rely on a policy that puts a condition on the payout of wages.

In the case before the courts, the employer wrote its policy to say that vacation would not be paid out at termination unless the employee (a) resigned (b) after providing a 2-week notice of resignation.  The trial court and Court of Appeals each held that the policy controlled. Colorado law does not require that employees be given any vacation, and employers are free to determine at what rate workers earn vacation.

However, the Colorado Supreme Court reversed. The Colorado Supreme Court held, first, that, once a worker had earned the vacation, in a known amount, it was both “earned” and “determinable,” which is all the statute in Colorado requires for it to be owed. Second, the Court pointed to another provision in the statute that prohibits waivers and forfeitures of vacation, once it has been earned, and held that the policy’s conditions were, therefore, unenforceable. In short, the Court held that the employee had “earned” the vacation, and it was “determinable;” therefore, it was owed, and any policy language attempting to forfeit it was unenforceable.

Particularly aggressive employers may point out that, in this particular case, the vacation policy said that vacation was “earned” once the necessary hours were worked to accrue it. They may argue that such language limits the reach of this decision, and that, if the policy had been written to say no vacation was “earned” until the necessary accrual-hours were worked and 2-week notice of resignation were given — such employers might argue — the policy would have been effective. Employers are advised to consult with experienced legal counsel before attempting to rely on such an aggressive reading of the case.

Source: Nieto v. Clark’s Market, Inc., 2021 CO 48 (6/14/2021).

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