Are you familiar with the Colorado Wage Claim Act?

In June the Colorado 2021 Supreme court removed use-it-or-lose it vacation policies.

Colorado businesses must pay vacation pay upon employee separation and cannot enforce “use-it-or-lose-it” vacation policies.

Under the act, employees are entitled to “earned, vested, determinable, and unpaid [compensation] at the time of discharge.” The Colorado Supreme Court ruling merged “earned and vested” thereby requiring employers to simply ask, “How much vacation time was earned at the time of separation?” to determine final check payout.

“Unlimited” PTO plans are not impacted by this ruling because employees never “accrue” their leave. Instead, they simply use PTO when needed and therefore do not get paid out any vacation leave upon separation.

If you have a vacation plan, you have options:

• Allow employees to accrue vacation at a certain rate based on seniority, or another non-discriminatory and equally applied measure.

• Implement a cap on Vacation/PTO accruals. Any earned and unused vacation/PTO must be paid out at termination (but will be at or below the accrual cap).