July 6, 2021
Authored by: Anthony George
Last month, the Colorado Supreme Court finally resolved a longstanding issue in Colorado employment law: whether employers may have a policy or agreement that provides for forfeiture of accrued but unused vacation. The Court’s answer was “no.”
In deciding Nieto v. Clark’s Market, No 19SC553 (Colo. June 14, 2021), the Court clarified the meaning of a troublesome provision of the Colorado Wage Act. C.R.S. 8-4-101(14)(a)(III) defines “wages” to include:
(III) Vacation pay earned in accordance with the terms of any agreement. If an employer provides paid vacation for an employee, the employer shall pay upon separation from employment all vacation pay earned and determinable in accordance with the terms of any agreement between the employer and the employee.
The employer in Nieto case argued (among other things) that the phrase “in accordance with the terms of any agreement between the employer and the employee” modified the phrase “the employer shall pay,” thus allowing employers to avoid the obligation to pay for unused vacation by adopting a policy to the contrary. The Colorado Supreme Court disagreed, holding that the phrase in question modifies the phrase “earned and determinable.” Therefore, under the Act, whether vacation is “earned and determinable” is