The Colorado Department of Labor and Employment (CDLE) has issued a final rule clarifying that employers are prohibited from requiring employees to forfeit any accrued paid time off (PTO) that they may choose to use for vacation and other needs. The final rule takes effect January 1, 2022.
In 2019, the CDLE adopted rules that made clear that a policy or practice that forces employees to forfeit accrued, unused vacation is prohibited. On June 14, 2021, the Colorado Supreme Court also affirmed that state law prohibits the forfeiture of any accrued vacation pay.
The rules and decision didn’t expressly address situations in which employers bundle vacation with other types of leave into a single PTO policy that employees can use for multiple purposes.
The final rule clarifies that “vacation pay” is defined as pay for leave, regardless of its label, that is usable at the employee’s discretion (as long as the employee meets procedural requirements such as notice and approval of particular dates), rather than leave usable only upon occurrence of a qualifying event (for example, a medical need, caretaking requirement, bereavement, or holiday). Therefore, if an employer provides PTO that doesn’t require a qualifying event for use (most PTO policies), state law prohibits the forfeiture of any accrued PTO.
The final rule also addresses issues relating to calculating rate of pay, determining the number of hours, and recordkeeping requirements for paid leave under the state’s Healthy Families and Workplaces Act. See the final rule for details.
Colorado employers should review policies and practices to ensure compliance with the final rule. Please contact your dedicated service professional with any questions.