Lawyers: Vacation pay ruling affords more flexibility

Phil Castle, The Business Times

Phil Castle

If allowed to stand, a court ruling will give Colorado employers more freedom in setting policies for vacation time, according to two partners at a Grand Junction law firm involved in the case.

“They have a lot of flexibility now,” said Alicia Severn, a partner at Bechtel, Santo & Severn.

Michael Santo, another partner, said the ruling affords employers an opportunity to consider their vacation policies.

The issue isn’t yet settled, though, because the Colorado Supreme Court has been asked to review the Colorado Court of Appeals ruling. The high court might not rule on the request until later this year or early next year, Severn and Santo said.

The case involves a dispute between an employee and Clark’s Market, a grocery business with stores in Western Colorado as well as Arizona and Utah. An employee at the Clark’s Market store in Telluride brought a complaint against the company, claiming she was entitled to payment for accrued vacation time when she was terminated.

Colorado law defines vacation time as wages that can accrue and must be paid when an employee leaves.

In representing Clark’s Market, Bechtel, Santo & Severn argued Colorado law also allows employers to establish agreements with employees about how vacation pay is earned and when and how it’s payable. Clark’s Market didn’t have to pay because of a provision of its vacation policy that stated employees who are terminated forfeit earned vacation and pay benefits.

A district court ruled in favor of Clark’s Market, but the ruling was appealed to the Colorado Court of Appeals.

Severn and Santo said the appeals court affirmed employers have the ability to determine when vacation time is earned and when it becomes vested and payable to employees.

Moreover, the Clark’s Market policy doesn’t constitute a waiver of an employee’s right to receive vacation pay because the policy as a whole sets out when vacation time is payable. Since the employee didn’t satisfy the conditions to make vacation time payable, Clark’s Market wasn’t required to pay.

If allowed to stand, the ruling gives employers the ability to consider and set vacation policies, Severn and Santo said. That’s important because vacation constitutes an important benefit in recruiting and retaining employees. Employees should clearly state in writing if and when vacation is earned and vests and what contingencies must be satisfied before vacation time becomes payable.