Are employers in Colorado required to pay workers for unused vacation time?

Colorado prohibits use-it-or-lose-it policies for accrued vacation time. Instead, employers must pay workers for any unused vacation time once their employment ends.

 Earned vacation time is protected under the Colorado Wage Act, which mandates that once a wage or compensation is earned, payment is guaranteed. 

State law does not require employers to offer paid vacation time, and those that do may set their own policies regarding accrual rates and caps. But any earned vacation days must be paid upon the employee’s separation regardless of any company policy, the Colorado Supreme Court ruled in 2021 in Nieto v. Clark’s Market, Inc. 

California, Colorado, Montana and Nebraska are the only states that prohibit use-it-or-lose-it policies. Twenty states require payout of accrued vacation time when workers leave their jobs. 

Roughly 46% of workers in the U.S. do not use up their available paid time off.