New Definition of Vacation Pay May Impact Some PTO Policies

July 21, 2022

At the beginning of the year, the Colorado Department of Labor and Employment expanded its definition of vacation pay. The regulations now define vacation pay as “pay for leave, regardless of its label, that is usable at the employee’s discretion (other than procedural requirements such as notice and approval of particular dates), rather than leave usable only upon occurrence of a qualifying event (for example, a medical need, caretaking requirement, bereavement, or holiday).”

This changes things for employers with PTO policies covering both vacation and paid sick leave under the Healthy Families and Workplaces Act. Employers whose PTO policies include paid sick leave will probably have to pay out all unused PTO upon termination, even though some of it is intended for sick leave. To avoid that outcome, employers should consider creating separate vacation and sick leave policies.

The revised rule is 2.17.1 of the Wage Protection Rules, which you can view here.