As we reported in this article, the Colorado Department of Labor and Employment recently updated the language around paying accrued, unused vacation time at termination of employment. The amended rule states that vacation pay may not be forfeited, even under an agreement, but that employers can decide:
(1) whether there is any vacation pay at all;
(2) the amount of vacation pay per year or other period;
(3) whether vacation pay accrues all at once, proportionally each week, month, or other period, and;
(4) whether there is a cap of one year’s worth (or more) of vacation pay. In other words, employers may have policies that cap employees at a year’s worth of vacation pay, but that does not force a forfeit of any of that year’s vacation.
The question that remains is how the courts may look at paid time off (PTO) policies, as the language of the law or regulation does not specifically address PTO. It is an open question that will most likely be resolved through litigation in court. An employer wanting to avoid such litigation would treat PTO the same as vacation and pay unused PTO on termination. Employers are also free to limit payout of PTO by following any of the examples from the regulation above.
There have been no such recent changes to Utah or Arizona laws in this area. If you have questions about this law in states where your employees work, please contact Employers Council attorneys for assistance. We will keep you updated as things develop.