Colorado employers must now pay out earned vacation pay irrespective of contrary policy

On June 14, 2021, the Colorado Supreme Court held that the Colorado Wage Claim Act (CWCA) requires Colorado employers to pay out employee vacation pay once earned—regardless of any relevant employment agreement or company policy. The court explained in Nieto v. Clark’s Market that, although employers are not required to offer their employees vacation pay, once they choose to provide it, vacation pay receives the same protections as other wages and compensation and cannot be forfeited when earned.

The CWCA requires Colorado employers to pay their employees earned wages in a timely manner. This includes payment of earned and determinable vacation pay upon separation from employment. Specifically, the statute provides that “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.” Colo. Rev. Stat. § 8-4-101(14)(a)(III).

In Nieto, the court considered the validity of an employer’s policy that, in certain circumstances, required employees to forfeit earned vacation pay benefits at termination of the employment relationship. The employer argued that the terms of the employment agreement dictated whether vacation pay must be paid upon separation because the CWCA does not require vacation pay to employees, and because Section 8-4-101(14)(a)(III) defers to the terms of the agreement between the employer and employee. The court concluded otherwise.

In a significant blow to Colorado employers, the court determined that the CWCA prevents forfeiture of earned vacation pay, and employers cannot contract around employees’ rights to earned vacation pay.

As a result of this decision, which provides long-awaited clarity, employees should immediately reassess existing vacation policies and employment agreements. Anyone with questions is encouraged to reach out to the authors of this article or the lawyer with whom they normally work at Hogan Lovells.


Authored by Tao Leung and Katy L. Forsstrom

Tao Leung
Los Angeles
Katy Forsstrom
Senior Associate
Languages English
Topics Employment
Countries United States


This website is operated by Hogan Lovells Solutions Limited, whose registered office is at 21 Holborn Viaduct, London, United Kingdom, EC1A 2DY. Hogan Lovells Solutions Limited is a wholly-owned subsidiary of Hogan Lovells International LLP but is not itself a law firm. For further details of Hogan Lovells Solutions Limited and the international legal practice that comprises Hogan Lovells International LLP, Hogan Lovells US LLP and their affiliated businesses ("Hogan Lovells"), please see our Legal Notices page. © 2022 Hogan Lovells.

Attorney advertising. Prior results do not guarantee a similar outcome.