In most states, private sector employers are not required to provide vacation, whether paid or unpaid, to employees. Therefore, employers have significant discretion in developing vacation and personal leave policies that best fit the needs of their workplace and employees.
If promised, vacation must be granted. Nonetheless, it is important for employers to understand that, if their practices, policies, or statements rise to the level of creating a “promise” of vacation, then the employer may create a binding legal obligation to provide vacation—even when state law would not otherwise require it to do so.
Payout of vacation at termination. This caution also applies to obligations to pay out accrued, but unused, vacation time at termination of employment.
Even where state law does not specifically require employers to pay out accrued vacation upon termination, a consistent practice, written policy, or contract promising such payment may create an enforceable legal obligation to do so.
In such circumstances, earned vacation will generally be treated as wages pursuant to state wage payment and collection laws.
Colorado law states that wages include vacation pay earned under any agreement with the employer. If an employer provides paid vacation for an employee, the employer must pay the employee for all accrued and unused vacation time if the employee resigns or is terminated (CO Rev. Stat. Sec. 8-4-101).
For additional information on final wage payments, please see the Paychecks
Use it or lose it policies. Use-it-or-lose-it policies are permissible under the Colorado Wage Protection Act provided that any such policy is included in the terms of an agreement between the employer and employee.