No More “Use-It-or-Lose-It” Vacation Policies for Colorado Employers

Last week, the Colorado Department of Labor and Employment (CDLE) indicated it would adopt a tougher enforcement stance against “use-it-or-lose-it” vacation policies, according to the agency’s Deputy Director, Dr. Peter Wingate. CDLE is responsible for enforcing the state’s wage and hour statute, the Colorado Wage Protection Act (C.R.S. § 8-4-101 et. seq.). New rules that assist CDLE’s investigators and hearing officers in enforcing Colorado wage and hour laws have been in place since January 1, 2015.

According to Wingate, CDLE continues its long-standing interpretation that under Colorado law, vacation pay that is earned in accordance with the terms of any agreement is wages owed to the employee upon separation of employment. Employers who have implemented a use-it-or-lose-it policy regarding paid vacation should reconsider. According to CDLE, “Once vacation pay has been earned, it cannot be unearned. Forfeiture clauses are not permitted in vacation agreements.” CDLE’s enforcement position applies to all paid vacation earned on or after January 1, 2015.

This afternoon, Dr. Wingate stated by telephone that official guidance was forthcoming that could differ from information already released informally. MSEC will continue to follow the issue closely.

CDLE has had the authority to adjudicate complaints for unpaid wages and compensation up to $7,500 since January 1 of this year.

According to MSEC’s most recent survey on Paid Time Off Policies, 15 percent of Colorado employers have a policy allowing an employee to carry over only a portion of earned vacation from one year to the next. Among resort-area employers, the percentage climbs to 19 percent. These employers should consider revising their policies to ensure employees are not losing, or forfeiting, any earned vacation time.