Nieto v. Clark’s Market: Exclusion of Migrants from WCA Is Unconstitutional

In Nieto v. Clark's Market, Inc., the Colorado Supreme Court reviewed whether an employer could withhold accrued vacation pay from an employee who had been terminated. Carmen Nieto brought the matter forward after Clark's Market, Inc. declined to pay her for unused vacation time, referencing a policy that allowed forfeiture under certain conditions.

Employment and Termination

Carmen Nieto worked at Clark's Market, Inc. (CMI) for over eight years before her termination in March 2017. During her employment, CMI provided paid vacation based on tenure and required that vacation be used within a defined period. The policy also included a clause stating that employees discharged for any reason, or those who failed to give proper notice before resignation, would forfeit their earned vacation pay.

At the time of her termination, Nieto believed she had accrued at least 136 hours of unused vacation, valued at $2,244. CMI declined to include this amount in her final paycheck based on its internal policy. Nieto submitted a written demand for payment, which was denied, and she then initiated a lawsuit under the Colorado Wage Claim Act (CWCA).

Lower Court Proceedings

CMI moved to dismiss the complaint under Rule 12(b)(5), arguing that their policy was valid under the CWCA. The district court granted the motion, determining that CMI had the right to define the terms under which vacation pay vested and that Nieto was not entitled to the vacation pay under those terms.

Nieto appealed the ruling. The Colorado Court of Appeals affirmed the dismissal, concluding that while Nieto may have earned vacation pay, her right to it had not vested due to her discharge, consistent with CMI’s policy. The appellate court interpreted the CWCA as allowing forfeiture where not prohibited by contract.

Statutory Interpretation by the Supreme Court

The Supreme Court reviewed the CWCA, particularly section 8-4-101(14)(a)(III), which defines vacation pay as a form of compensation that must be paid upon separation if it is earned and determinable. The court noted that while the CWCA does not require employers to offer vacation pay, when they choose to do so, the pay becomes protected once earned.

CMI had argued that the phrase “in accordance with the terms of any agreement” in the statute permitted the forfeiture clause. The court found the statute ambiguous in that regard and reviewed the legislative history and the structure of the CWCA to clarify intent.

The court observed that other sections of the CWCA use the term "vested" alongside "earned" and "determinable," but that section (14)(a)(III) does not. The court interpreted this omission as intentional, concluding that only "earned and determinable" conditions applied to vacation pay. The court also found persuasive the broader purpose of the CWCA, which is to ensure employees receive compensation for work performed.

Legislative and Agency Support

The court examined legislative debates and agency interpretations to determine intent. During the legislative process, an amendment allowing forfeiture with notice had been proposed but removed due to unintended consequences. Testimony from business representatives clarified that the final version intended to require payment of all earned vacation time upon termination.

The Colorado Department of Labor and Employment had also issued guidance stating that employers could not enforce forfeiture clauses on earned vacation pay. Although the court declined to treat these rules as binding, it noted that the agency’s interpretation aligned with the purpose and text of the CWCA.

Final Decision and Remand

The Supreme Court concluded that vacation pay provided by an employer becomes protected under the CWCA once it is earned and determinable, regardless of whether it has vested under the employer’s policy. Any contractual term that seeks to forfeit earned vacation pay upon separation is void under section 8-4-121. Because Nieto stated a viable claim for relief, the court reversed the decision of the appellate court and remanded the case for further proceedings.

Labor and Employment Rights Support

If you have questions about your rights under state wage laws or need assistance reviewing employment policies, the team at Whitcomb, Selinsky, PC provides guidance on compliance with labor and employment regulations, wrongful termination claims, wage disputes, and more. Contact us to learn how we can assist with your employment law concerns.