Do I Need to Compensate Fired Employees for Paid Time Off in Colorado?

As an at-will employment state, Colorado employers and employees may terminate the working relationship at any time and for any reason, except a discriminatory reason or one prohibited by Federal or State law, or none at all. This rule allows employers and employees to respond quickly to changes in the relationship and gives employers the option to fire employees if needed without breaking a contract. While employees are free to leave at any time to pursue better opportunities, this law makes it difficult for employees to obtain a sense of security in any professional position. 

 Employees who work for Colorado-based companies that offer paid time off (PTO) may often wonder whether they’re entitled to compensation for unused PTO when they resign. Likewise, employers in Colorado may wonder whether they need to pay out unused vacation time to employees whom they terminate or who leave amicably. While there is no law requiring employers to offer paid time off at the state or federal level, Colorado law prohibits employers from implementing a “use it or lose it” policy.

Are Employees Entitled to Paid Time Off in Colorado?

The United States is an outlier in the developed world when it comes to employee benefits like paid time off. There is no federally-mandated paid time off in the U.S. and Colorado state law does not require it; however, most employers choose to offer paid time off to remain competitive in their industries and attract top talent. Research also suggests that employees perform better and are more productive at work when they return from vacation. If your company offers paid time off, there are certain rules you must follow to avoid legal action. 

If you have questions about how to avoid a complaint by an employee, it’s best to make sure your company policies are up-to-date and law-abiding with the help of a Denver employment lawyer.

Do I Need to Pay Terminated Employees for Accrued Paid Time Off?

Yes. Colorado employers who offer paid time off may not pressure workers into taking the time off when it’s convenient for the employer or risk losing it altogether. Employers who offer paid time off should understand that, under Colorado law, any paid time off earned under any agreement with an employer counts as wages. As wages, employees cannot lose their vacation benefits. This means that employers must pay employees for all accrued and unused vacation time if an employee resigns or if the employer terminates him. 

What Counts as Paid Time Off in Colorado?

Employers can offer paid time off in various ways. Generally, PTO includes:

• Paid vacation
• Paid sick days
• Paid personal days

Whether you offer a certain number of sick and personal days or permit workers to take time off as needed from a bucket of PTO, you must pay out the time to employees who resign or are let go. If you’re unsure about the best way to offer employees time off, discuss which PTO policy could work best for your company with an employment lawyer.

Working with a Denver Employment Lawyer to Draft Your PTO Policy

Although federal law does not mandate paid time off, many employers in Colorado offer PTO to maintain a healthy and robust team. Employers who offer PTO should document company policies with clear and consistent language so their employees understand precisely what they are entitled to receive upon resignation or termination.

If you’re unsure about the best way to offer PTO and how to properly document your policies for employees to reference, collaborate with attorney Nathan Davidovich, a Colorado employment lawyer of more than 55 years. Together, you can draft an engaging employee handbook and policies that reward your employees for their hard work, while reducing your risk for potential legal action.

Call (303) 825-5529 or complete our contact form to be in touch with Nathan.