v. Clark's Market

2019 COA 98

• Court: Colorado Court of Appeals
• Decided: June 27, 2019
• Docket: 18CA1154, Nieto
• Status: Published

Opinion

The summaries of the Colorado Court of Appeals published opinions constitute no part of the opinion of the division but have been prepared by the division for the convenience of the reader. The summaries may not be cited or relied upon as they are not the official language of the division. Any discrepancy between the language in the summary and in the opinion should be resolved in favor of the language in the opinion.

SUMMARY June 27, 2019

2019COA98

No. 18CA1154, Nieto v. Clark’s Market — Labor and Industry — Colorado Wage Claim Act — Wages — Vacation Pay — Payments Required on Termination of Employment — Nonwaiver of Employee Rights

A division of the court of appeals addresses whether an

employment agreement that says an employee is not entitled to

payment for accrued but unused vacation time if she is fired or fails

to give two weeks’ notice violates the Colorado Wage Claim Act

(CWCA). In holding that it does not, the division recognizes that the

CWCA does not create a substantive right to payment for accrued

but unused vacation time under section 8-4-101(14)(a)(III), C.R.S.

2018. Rather, an employee’s right to compensation for accrued but

unused vacation pay depends on the parties’ employment

agreement. Agreements conditioning an employee’s right to compensation for accrued but unused vacation time do not run

afoul of the CWCA’s anti-waiver provision, section 8-4-121, C.R.S.

2018, which protects only against waiver of rights conferred by the

CWCA. COLORADO COURT OF APPEALS 2019COA98

Court of Appeals No. 18CA1154 Pitkin County District Court No. 18CV8 Honorable Denise K. Lynch, Judge

Carmen Nieto,

Plaintiff-Appellant,

v.

Clark’s Market, Inc.,

Defendant-Appellee.

JUDGMENT AFFIRMED

Division IV Opinion by JUDGE J. JONES Lipinsky and Martinez*, JJ., concur

Announced June 27, 2019

Albrechta & Albrechta, LLC, Eleni K. Albrechta, David T. Albrechta, Durango, Colorado, for Plaintiff-Appellant

Bechtel Santo & Severn, Michael C. Santo, Alicia W. Severn, Grand Junction, Colorado, for Defendant-Appellee

*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art. VI, § 5(3), and § 24-51-1105, C.R.S. 2018. ¶1 Carmen Nieto appeals the district court’s judgment dismissing

her claim for vacation pay against her former employer, Clark’s

Market, Inc. (the Market). The issue before us is whether the

Market’s policy saying that an employee isn’t entitled to payment for

unused vacation time if the Market discharges her or if she

voluntarily quits without giving two weeks’ notice violates the

Colorado Wage Claim Act (CWCA). We hold that it does not, and so

we affirm the district court’s judgment.

I. Background

¶2 While working for the Market, Ms. Nieto accrued vacation time

pursuant to the vacation policy in the Market’s employee handbook.

That policy explains how vacation time accrues, how (and when) it

can be used, and whether and under what circumstances

employees are entitled to payment for accrued but unused vacation

time when they leave employment. As to the latter, the policy says

that an employee is entitled to payment for accrued but unused

vacation time if she voluntarily resigns and gives at least two weeks’

notice; but if the Market discharges an employee for any reason or

for no reason or if the employee fails to give two weeks’ notice before

quitting, the employee “forfeits all earned vacation pay benefits.”

1 When the Market discharged Ms. Nieto, it refused to pay her for

vacation time she had accrued but hadn’t used, pointing to the

vacation policy.1

¶3 Ms. Nieto sued, seeking payment for accrued vacation time

and alleging that the Market’s vacation forfeiture policy violates

sections 8-4-101(14)(a)(III) and 8-4-121, C.R.S. 2018, of the CWCA

because it denies her payment for earned wages. The Market

moved to dismiss her complaint under C.R.C.P. 12(b)(5) for failure

to state a claim. The district court granted that motion, concluding

that the CWCA “clearly and unambiguously gives employers the

right to enter into agreements with its employees regarding vacation

pay.”

1 Ms. Nieto alleged that the Market’s policy governing vacation pay is an employment agreement. For purposes of moving to dismiss, the Market didn’t dispute that allegation. And the parties’ briefs on appeal expressly assume the policy is an agreement. We don’t venture any opinion on whether the policy in the Market’s handbook constitutes an “agreement” as contemplated by the CWCA, but merely assume that it does because of the procedural posture of the case.

2 II. Discussion

¶4 Ms. Nieto contends that the district court misconstrued the

CWCA in determining that she didn’t state a plausible claim for

relief. Her argument, at its core, is that section 8-4-121 voids the

Market’s policy requiring employees to voluntarily resign and give

two weeks’ notice to be eligible to receive payment for accrued but

unused vacation time. This is so, she says, because she has a right

to payment for such vacation time under sections 8-4-101(14)(a)(III)

and -109(1)(a), C.R.S. 2018. This case therefore turns on our

interpretation of these provisions of the CWCA.

A. Standard of Review and Interpretive Principles

¶5 We review de novo an order granting a motion to dismiss. See

Norton v. Rocky Mountain Planned Parenthood, Inc., 2018 CO 3, ¶ 7.

A court properly grants a C.R.C.P. 12(b)(5) motion to dismiss for

failure to state a claim where the complaint’s factual allegations,

taken as true and viewed in the light most favorable to the plaintiff,

don’t present plausible grounds for relief. See id.; Begley v. Ireson,

2017 COA 3, ¶ 8.

¶6 We also review issues of statutory interpretation de novo.

Colo. Oil & Gas Conservation Comm’n v. Martinez, 2019 CO 3, ¶ 19.

3 ¶7 In interpreting a statute, we look to the language of the statute

and apply the plain and ordinary meanings of the words and

phrases used therein. Id. “We do not add or subtract words from

the statute[.]” City & Cty. of Denver v. Dennis, 2018 CO 37, ¶ 12.

And, we consider the entire statutory scheme to give “consistent,

harmonious, and sensible effect to all of its parts.” Id. If the

statutory language is clear and unambiguous, we apply it as written

and our analysis stops there. Id.

B. Applicable Law

¶8 The CWCA says that when an employer discharges an

employee, “the wages or compensation for labor or service earned,

vested, determinable, and unpaid at the time of such discharge is

due and payable immediately.” § 8-4-109(1)(a). Section

8-4-101(14)(a)(III) explicitly includes vacation pay in the definition of

wages:

“Wages” or “compensation” means:

...

(III) Vacation pay earned in accordance with the terms of any agreement. If an employer provides paid vacation for an employee, the employer shall pay upon separation from employment all vacation pay earned and

4 determinable in accordance with the terms of any agreement between the employer and the employee.

But “[n]o amount is considered to be wages or compensation until

such an amount is earned, vested, and determinable.”

§ 8-4-101(14)(a)(I); see Hernandez v. Ray Domenico Farms, Inc.,

2018 CO 15, ¶ 9 (applying this limitation to vacation pay under

subsection (14)(a)(III)).2

2 The General Assembly changed and added to the definition of “‘[w]ages’ or ‘compensation’” significantly in 2003. Ch. 286, sec. 1, § 8-4-101(8)(a), 2003 Colo. Sess. Laws 1852. Among other things, it added the “earned, vested, and determinable” language to subsection (14)(a)(I), and thereby essentially codified a part of Hartman v. Freeman, 197 Colo. 275, 279, 591 P.2d 1318, 1321 (1979), by explicitly including vacation pay in the definition. See id. at 279, 591 P.2d at 1321 (“[V]acation pay [—] like wages [—] is both vested and determinable as of the date of termination.”) (emphasis added). It isn’t clear, however, why the General Assembly chose to use the language “earned, vested, and determinable” in section 8-4- 101(14)(a)(I), C.R.S. 2018 (general definition of wages), and in section 8-4-109(1)(a), C.R.S. 2018 (termination provision), but excluded the word “vested” from the vacation pay provision, section 8-4-101(14)(a)(III). See Hernandez v. Ray Domenico Farms, Inc., 250 F. Supp. 3d 789, 800 n.9 (D. Colo. 2017) (describing this, and other, idiosyncrasies of the CWCA in detail). Regardless, these arguably questionable drafting choices don’t create any ambiguity with respect to the issue before us.

5 ¶9 Section 8-4-121 provides that “[a]ny agreement, written or

oral, by any employee purporting to waive or to modify such

employee’s rights in violation of this article shall be void.”

C. Analysis

¶ 10 Ms. Nieto argues that her accrued vacation pay was earned

and determinable under section 8-4-101(14)(a)(III), the Market

therefore owed her for that time according to section 8-4-109(a)(1),

and the Market’s forfeiture policy purporting to deprive her of

payment for that time is, under section 8-4-121, an illegal waiver of

her right to payment. Her argument, however, misconstrues the

applicable provisions of the CWCA.

¶ 11 Nothing in the CWCA creates a substantive right to payment

for accrued but unused vacation time. Rather, “the employee’s

substantive right to compensation and the conditions that must be

satisfied to earn such compensation remain matters of negotiation

and bargaining, and are determined by the parties’ employment

agreement, rather than by the statute.” Barnes v. Van Schaack

Mortgs., 787 P.2d 207, 210 (Colo. App. 1990); see § 8-4-

101(14)(a)(III) (including vacation pay in the definition of wages or

compensation if “earned in accordance with the terms of any

6 agreement” and if “earned and determinable in accordance with the

terms of any agreement between the employer and the employee”).

Put another way, the CWCA merely “establishes minimal

requirements concerning when and how agreed compensation must

be paid[.]” Barnes, 787 P.2d at 210. The question, then, whether

particular compensation is “earned, vested, [and] determinable,”

and therefore due on termination, see § 8-4-109(1)(a), depends on

the terms of the parties’ agreement, see Hernandez, ¶ 12 (When

read together, sections 8-4-101 and -109 “demonstrate that the

General Assembly understood that certain categories of wages or

compensation — such as unused vacation time . . . — would not be

available until separation because they may not become ‘vested’ or

‘determinable’ under the employment agreement until that time.”)

(emphasis added).

¶ 12 In this case, the parties’ agreement conditioned payment for

accrued but unused vacation time. Ms. Nieto does not allege that

she met those conditions. She therefore did not assert a plausible

claim that an agreement with the Market entitles her to payment for

accrued but unused vacation time.

7 ¶ 13 The anti-waiver statute, section 8-4-121, doesn’t save her

claim. That statute prohibits waiver of an employee’s “rights in

violation of [the CWCA].” Id. It doesn’t create any substantive

entitlement to payment independent of the parties’ agreement; it

only applies to rights conferred by the CWCA. Barnes, 787 P.2d at

210. And, as discussed, the CWCA looks to the parties’ agreement

as the sole potential source of any substantive right to payment.

¶ 14 Our conclusion finds support in Barnes. In that case, a

division of this court concluded that the CWCA didn’t entitle the

plaintiff to payment for loans he originated that closed in the month

following his termination because an employment agreement

“expressly and unequivocally provide[d] that [the] plaintiff [was]

entitled to incentive fee commissions only if he generated loan

applications that resulted in loan closures during the calendar

month when his employment terminate[d].” Id. The division held

that this forfeiture provision didn’t violate the CWCA because the

plaintiff hadn’t fully earned the compensation under the

employment agreement. Id.; cf. Gomez v. Children’s Hosp. Colo., No.

18-CV-00002-EH, 2018 WL 3303306, at *6 (D. Colo. July 8, 2018)

(unpublished order) (employment agreement’s provision saying that

8 employees “forfeit” illness leave pay if they have less than fifteen

years of service and/or 650 hours of illness leave “on the date of

termination” is enforceable and does not violate the CWCA);

Cheyenne Mountain Sch. Dist. No. 12 v. Thompson, 861 P.2d 711,

713-16 (Colo. 1993) (treating as enforceable a contractual provision

denying pay for unused vacation when the employee is terminated

without cause).

¶ 15 Courts in other jurisdictions applying similar wage payment

statutes have likewise upheld conditional payment provisions

pertaining to vacation pay. For instance, in Lee v. Fresnius Medical

Care, Inc., 741 N.W.2d 117, 126 (Minn. 2007), the court reasoned

that because vacation pay is “wholly contractual,” “employers are

permitted to set conditions that employees must meet in order to

exercise their earned right to vacation time with pay.” The

employee policy in that case said that terminated employees aren’t

eligible to receive payment for “earned but unused Paid Time Off.”

Id. at 120. The court concluded that the policy was valid because

the legislature had not intended to create a substantive right to

vacation pay. Id. at 126. Instead, the statute saying that wages

“actually earned and unpaid” are due at the time of termination was

9 a timing statute that mandated when, not what, an employer must

pay a terminated employee. Id. at 125. Because the employee

didn’t meet the employment contract condition, she wasn’t entitled

to payment in lieu of paid time off. Id.

¶ 16 And in Indiana Heart Associates, P.C. v. Bahamonde, 714

N.E.2d 309, 311 (Ind. Ct. App. 1999), the court considered a policy

saying that an employee is ineligible for payment for accrued paid

time off if the employee is “involuntarily terminated” for

unsatisfactory work, gross misconduct, or violation of any rule. The

court held that this policy was valid under Indiana’s Wage Payment

Statute: “[A]n employee’s right to vacation pay under the statute is

not absolute. Rather, an employee is entitled to her accrued

vacation pay to the time of termination ‘provided no agreement or

published policy exist[s] to the contrary.’” Id. at 311-12.

¶ 17 In sum, reading sections 8-4-101(14)(a)(III), -109(a), and -121

together, we hold that the Market’s unused vacation policy doesn’t

violate the CWCA. Ms. Nieto’s right to compensation for accrued

but unused vacation pay depends on the parties’ employment

agreement. And that agreement unequivocally says that the

10 vacation pay she seeks wasn’t vested given the circumstances

under which she left the Market’s employ.

III. Conclusion

¶ 18 We affirm the judgment.

JUDGE LIPINSKY and JUSTICE MARTINEZ concur.