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Colorado wage law does not require that vacation time be given. Colorado wage law does not require paid vacation and does not require that an employer establish a vacation policy.
An employer may establish a vacation policy in writing or by custom and practice. Employees must be made aware of the employer's policy. Employers and employees must follow established policy unless and until that policy is changed. The Division recommends that employers develop their vacation policy in consultation with legal counsel.
Colorado wage law provides that vacation pay, earned in accordance with the terms of any agreement, is classified as wages or compensation. 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.
In general, the granting of vacation leave by an employer for a current employee is made pursuant to the employer's policy. The Division of Labor does not intervene in disputes involving the scheduling of vacation leave or the denial of use of vacation leave for current employees.
Q. Can employers in Colorado have “use it or lose it” provisions in vacation agreements?
A. Yes. “Use-it-or-lose-it” policies are permissible under the Colorado Wage Protection Act, provided that any such policy is included in the terms of an agreement between the employer and employee. A “use-it-or-lose-it” policy may not operate to deprive an employee of earned vacation time and/or the wages associated with that time. Any vacation pay that is “earned and determinable” must be paid upon separation of employment. The terms of an agreement between the employer and employee will dictate when vacation pay is “earned.”
Q. What factors are used to determine if a specific “use it or lose it” provision is permissible?
A. If a party challenges the validity of a “use-it-or-lose-it” policy, the Division will initiate a wage complaint investigation, The Division will review the policy in conjunction with the remaining terms of the agreement between the employer and employee. In the event that an agreement is silent or ambiguous as to when vacation becomes “earned,” the Division may consider the following factors in determining whether a “use-it-or-lose-it” provision is permissible under the CWA.
These factors are not exhaustive and may vary from case to case.