Search form

Colorado Employer’s Vacation Policy that Included Forfeiture Provision Upheld

By Ryan P. Lessmann and Jeffrey H. McClelland
  • August 5, 2019

An employer’s vacation policy did not violate the Colorado Wage Claim Act (CWCA), despite stating that employees forfeit earned vacation pay if they are discharged or quit without giving two weeks’ notice, the Colorado Court of Appeals has held. Nieto v. Clark’s Market, Inc., 2019 COA 98 (Colo. App. June 27, 2019).


Carmen Nieto worked at Clark’s Market and accrued vacation time under the vacation policy in the Market’s employee handbook. The Market’s handbook stated that if an employee is discharged, with or without cause, or if the employee fails to give two weeks’ notice before quitting, the employee “forfeits all earned vacation pay benefits.”

After Nieto’s discharge, the Market, citing its policy, refused to pay her the vacation time she accrued, but did not use. Nieto sued the employer, seeking payment for her unused, accrued vacation time.

The District Court found in favor of the Market. Nieto appealed.

Vacation Pay Statute

The Colorado Court of Appeals affirmed the lower court decision. Former Colorado Supreme Court Justice Alex Martinez sat on the panel by assignment of the Chief Justice.

The Court held that the Market’s policy did not violate the CWCA because vacation pay depends on the parties’ employment agreement.

The CWCA states, “the wages or compensation for labor or service earned, vested, determinable, and unpaid at the time of such discharge is due and payable immediately.” It also states that “wages” or “compensation” includes “vacation pay earned in accordance with the terms of any agreement.”

The Court clarified that the CWCA “merely ‘establishes minimal requirements concerning when and how agreed compensation must be paid.’” (Emphasis in original.) (Quoting Barnes v. Van Schaack Mortgage, Division of Van Schaack & Co., 787 P.2d 207, 210 (Colo. App. 1990).) Thus, the Court explained it must look to an employment agreement to determine whether the particular compensation is “earned, vested, and determinable.”

The Court relied on its 1990 opinion in Barnes, in which it ruled that an employee could not recover a bonus earned before his termination because the bonus was not vested under the agreement until after his termination. Thus, the Barnes plaintiff was not entitled to bonuses for the loans he originated that closed in the month following his termination, because the employment agreement “expressly and unequivocally provide[d] that [the] plaintiff [was] entitled to incentive fee commissions only if he generated loan applications that resulted in loan closures during the calendar month when his employment terminate[d].”

Similarly, Nieto’s right to compensation for accrued, unused vacation depended on the vacation policy in the Market’s employee handbook, the Court explained. The vacation policy clearly stated that the vacation pay Nieto sought “wasn’t vested given the circumstances under which she left the Market’s employ.”


After the Court released Nieto, the Colorado Department of Labor and Employment (CDLE) removed its informal guidance on “use-it-or-lose-it” vacation policies from its website. Previously, the CDLE guidance stated:

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.

Nieto could be reexamined by the Colorado Supreme Court if Nieto seeks review.

Please contact a Jackson Lewis attorney to discuss these developments and your specific organizational needs.

We thank summer clerk Perdeep S. Badhesha, in our Denver office, for his assistance with this article.

©2019 Jackson Lewis P.C. This material is provided for informational purposes only. It is not intended to constitute legal advice nor does it create a client-lawyer relationship between Jackson Lewis and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material. This material may be considered attorney advertising in some jurisdictions. Prior results do not guarantee a similar outcome.

Reproduction of this material in whole or in part is prohibited without the express prior written consent of Jackson Lewis P.C., a law firm that built its reputation on providing workplace law representation to management. Founded in 1958, the firm has grown to more than 900 attorneys in major cities nationwide serving clients across a wide range of practices and industries including government relations, healthcare and sports law. More information about Jackson Lewis can be found at

See AllRelated Articles You May Like

October 8, 2019

DOL Proposes FLSA Regulations to Close Door on ‘80/20’ Rule, Implement Tip Pooling Amendments

October 8, 2019

The Department of Labor (DOL) published a Notice of Proposed Rulemaking (NPRM) on October 8, 2019, to eliminate the “20% Rule,” or “80/20 Rule,” under the Fair Labor Standards Act (FLSA). The 20% Rule, which first appeared in a DOL Field Operations Handbook (FOH) in 1988, requires employers to pay tipped employees the full minimum... Read More

October 7, 2019

No California Waiting-Time, Inaccurate Wage Statement Penalties Based on Unpaid Meal Period Premiums, Court Rules

October 7, 2019

Do meal period premiums trigger derivative liability for waiting-time penalties and inaccurate wage statements? The California Court of Appeal has ruled in the negative on the oft-asked question. Naranjo et al. v. Spectrum Security Services, Inc., No. B256232 (Cal. Ct. App. Sept. 26, 2019). The Court ruled that actions to recover... Read More

October 7, 2019

Common Mistakes Companies Make with Gig Economy Workers

October 7, 2019

It is no secret that traditional employers often benefit from non-traditional workplace arrangements available in the gig economy, such as relief from paying unemployment insurance and worker’s compensation plans or being exempt from many minimum wage or overtime laws that apply to the traditional employer-employee relationship.... Read More

Related Practices