Telling Time in Colorado Use-It-Or-Lose-It Vacation Policies

According to a recent survey, 15 percent of Colorado employers enforce “use-it-or-lose it” vacation policies, under which employees must use their paid time off by a specified date or lose it. However, recent statements by the Colorado Department of Labor and Employment (DOL) Deputy Director Peter Wingate caused many to question if these policies were even legal, leading the DOL to release a document clarifying the agency’s position. In an article penned for Law360, Faegre Baker Daniels partner Mary Will and associate Sarah Benjes assessed the DOL guidance and dished advice for employers to consider in structuring their vacation policies.

“Given the recent reporting regarding the statements by Colorado Department of Labor (DOL) representatives, this guidance should give Colorado employers some assurance that their use-it-or-lose-it policies are permissible—at least according to the CO DOL at this time—provided they do not call for a forfeiture of accrued vacation time upon termination,” the article said. “In other words, such a policy can provide that vacation time must be used by the end of the calendar year. A policy cannot say: Use your vacation time before you are terminated, or you’ll lose it.”