v. Clark's Market

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
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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.
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¶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.
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¶ 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.
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