"use-it-or-lose-it" Benefit Policies and the Colorado Wage Claim Act
| Publication year | 2012 |
| Pages | 39 |
| Citation | Vol. 41 No. 6 Pg. 39 |
2012, June, Pg. 39. "Use-It-or-Lose-It" Benefit Policies and the Colorado Wage Claim Act
June 2012
Vol. 41, No. 6 [Page39]
Labor and Employment Law articles are sponsored by the CBA Labor and Employment Law Section to present current issues and topics of interest to attorneys, judges, and legal and judicial administrators on all aspects of labor and employment law in Colorado.
Coordinating Editor
John M. Husband, Denver, of Holland and Hart LLP-(303) 295-8228, jhusband@hollandhart.com
This article discusses the potential liability for Colorado employers who adopt policies that do not compensate their employees for previously earned vacation and sick leave benefits at separation from employment.
During the recent downturn in the economy, employers of all sizes are in search of cost-cutting measures to help increase shrinking profits and reduce layoffs. Some of these measures have focused on changes in employment policies, such as the elimination or reduction of employee benefits. Vacation and sick leave are two such benefits that employers have revised in an effort to reduce costs.
Employers often provide their employees vacation and sick leave benefits calculated on a yearly or monthly basis. Following a designated accumulation period, the employee receives a certain number of vacation and/or sick days as a result of the employee's labor. Often, employers have adopted policies to convert unused vacation and sick days into compensation. Under this type of policy, the employee is entitled to receive unused vacation and sick days in the form of wages, generally calculated based on of the employee's salary or wage rate. Attempting to reduce costs and to eliminate compensation payments, some employers have incorporated a "use-it-or-lose-it" policy for these unused vacation and sick days. However, use-it-or-lose-it policies could subject employers to liability.
Colorado appellate courts have not directly addressed this issue. Courts have provided nominal insight on how to approach this issue and have yet to address the specific liability that could result if employers provide compensation for unused vacation and sick days but correspondingly adopt use-it-or-lose-it policies. It appears that employers may adopt such policies, as long as they avoid the potential for wage claims.
This article provides an overview of use-it-or-lose-it policies and discusses examples of typical policies used by employers. It also discusses the potential liability that could result under Colorado law from the improper use of a use-it-or-lose-it policy, and suggests an approach for employers to adopt to avoid liability under such policies.
Common Vacation and Sick Leave Policies
Paid time off (PTO) is a combination of traditional vacation days and sick leave. Employers can provide a set schedule of accumulated time or days earned by the employee, which in turn equates to a number of PTO or vacation days. The amount of PTO an employee receives each year usually is based on a period of days, months, or years of eligible service for the employer. PTO benefits sometimes begin to accrue immediately; however, employers may provide such benefits after ninety days or one year of service to the employer. The accompanying chart contains examples of PTO benefit schedules.
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Time Frame |
PTO Benefits Accrued |
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After 90 days of... |
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