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Colorado Supreme Court voids Aspen-based grocer’s vacation-pay policy; ruling being watched by state's business leaders, owners

The court ruled Monday that Aspen-based Clark’s Market grocery chain’s “use it or lose it” vacation-pay policy runs afoul of state wage law.

ASPEN, Colo. — The Colorado Supreme Court ruled Monday that Aspen-based Clark’s Market grocery chain’s “use it or lose it” vacation-pay policy runs afoul of state wage law.

The decision had been awaited closely by Colorado’s business and labor-law community and brought clarity to how vacation policies are addressed under the Colorado Wage Claim Act, people involved with the case said.

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“It’s really a big decision,” said attorney David Albrechta, whose Durango firm Albrechta & Albrechta worked with Denver attorney Hunter Swain in their representation of Carmen Nieto, who sued Clark’s Market. “It felt good to get this clarification to know and understand how the law protects employees who have earned vacation time.”

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Grand Junction attorney Michael Santo, one of the attorneys for Clark’s in the matter, said, “Certainly we, and I’m sure some other attorneys as well, would rather have seen a different result.”

"This has been an issue that has divided the legal community in Colorado for years,“ he continued. ”Attorneys who represent individuals and attorneys who represent companies have not agreed on how all this vacation pay works.“

Now, with the Supreme Court’s clarification on the disputed aspect of vacation pay under Colorado law, the case returns to Pitkin County District Court for further proceedings.

Nieto worked for Clark’s Market in Telluride for eight and a half years until her March 2017 termination, according to the suit. She had accumulated 136 hours of unused paid vacation, but Clark’s withheld the compensation, citing company policy that terminated employees and those failing to give two-weeks notice “forfeit all earned vacation pay benefits.”

Nieto originally brought the suit in January 2018 against Clark’s in San Miguel County District Court on claims that the policy violated the Colorado Wage Claim Act. Clark’s successfully motioned for the transfer of the lawsuit to Pitkin County, which became the venue in late March 2018.

The suit argued Nieto should have received her vacation pay because the act states that terminated employees are entitled to “earned, vested, determinable and unpaid at the time of such discharge.”

“This is what we always believed, and it is why we filed (the lawsuit),” Albrechta said.

Their complaint failed to gain traction, however, in the lower courts.

The first setback came when Pitkin County District Judge Denise Lynch dismissed the lawsuit, which said Nieto was owed $2,244 in vacation pay.

Lynch’s dismissal order, from May 2018, said the vacation-pay policy set by Clark’s Market was independent from the Colorado Wage Claim Act, which the judge said “clearly and unambiguously gives employers the right to enter into agreements with its employees regarding vacation pay.”

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Nieto’s next stop was the Colorado Court of Appeals, which upheld Lynch’s decision and explained in its June 2019 ruling that “an employee’s right to compensation for accrued but unused vacation pay depends on the parties’ employment agreement.”

After the Colorado Supreme Court announced in April 2020 that it would hear Nieto’s case, responses came from organizations that watch out for small businesses.

Those included the National Federation of Independent Business, the Denver Metro Chamber of Commerce and Colorado Civil Justice League, which together filed an amicus brief in the case supporting Clark’s Market. They argued that an employer should be able to determine itself whether to pay a departing employee for unused vacation time.

“This case is a small business issue to its core,” Tony Gagliardi, NFIB’s Colorado state director, said in a statement around the time of the brief’s filing. “Vacation pay is a voluntary benefit that employers can provide to their working employees. It’s an additional expense and one that is truly an employee benefit. Employers, especially small business employers, have the right to determine their employment agreements.”

In its 27-page ruling, which was delivered by Justice Melissa Hart, the Supreme Court noted that employers are not required to compensate employees for unused vacation time. Employers who do pay vacation time, however, are bound to the Colorado Wage Claim Act, the court said.

“We conclude that, although the CWCA does not entitle an employee to vacation pay, when an employer chooses to provide it, such pay is no less protected than other wages or compensation and, thus, cannot be forfeited once earned,” the ruling said. “Accordingly, under the CWCA, all vacation pay that is earned and determinable must be paid at the end of the employment relationship ... and any term of an agreement that purports to forfeit earned vacation pay is void. Because the court of appeals erred in concluding otherwise, we reverse the division’s judgment and remand for further proceedings consistent with this opinion.“

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Santo said Clark’s Market officials were simply following company policy that prohibits employees from receiving pay for unused vacation time if they fail to provide two-weeks notice or are terminated.

“Clark's won at the district level; the district court agreed that they could do this,” Santo said. “The Court of Appeals agreed with them. The Supreme Court disagreed. Obviously we disagree with the Supreme Court's decision, but understand the decision and will see what happens in the rest of the case."

Nieto’s legal team hailed the high court’s decision as a win for workers across the state.

“Today’s decision marks a major victory not just for Ms. Nieto but for hundreds of thousands of working people all across Colorado,” Swain said in a statement. “We believe the impact of the Court’s decision is clear — every Colorado worker who earns paid vacation must be compensated for all earned but unused vacation time when leaving a job.”

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