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State Updates


Colorado adopts final rules on vacation payouts


Author: ADP Admin/Monday, February 3, 2020/Categories: Compliance Corner , State Compliance Update, Colorado

The Colorado Department of Labor and Employment (CDLE) has adopted final rules clarifying that employers must pay employees for unused vacation at the time of separation.


Under the Colorado Wage Act (CWA), as amended, wages cannot be forfeited once earned. Under the law, wages include vacation pay earned pursuant to any agreement. If an employer provides paid vacation, they must pay all earned vacation pay upon separation.

Final Rules:

In the final rules, the CDLE states that the language of the law doesn't allow the forfeiture of any earned vacation pay. Thus, a policy or practice that forces employees to forfeit accrued, unused vacation is prohibited under the rules. 

However, the law does allow agreements on:

·     Whether there is any vacation pay at all;

·     The amount of vacation per year;

·     Whether vacation pay accrues all at once, or proportionally each week, month, or other period; and

·     Whether there is an accrual cap of one year's worth of vacation pay. Accordingly, employers may have policies that cap employees at a year's worth of vacation pay, but that do not forfeit any of that year's worth.

The rules also state that employers are prohibited from taking adverse action against an employee who has filed a complaint, testified, or instituted any proceeding under the law. The rules also make clear that any effort to use a person's immigration status to negatively impact their rights is unlawful.

Compliance Recommendations:

Colorado employers should review their policies and practices to ensure compliance with the final rules. Please contact your dedicated service professional with any questions.

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Tags: 02/06/20

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