Should vacation and sick pay be included in an average weekly wage calculation in Colorado?
Wages in general
Wages could include earnings from the employer, possible earnings from concurrent employment, some bonuses, the cost of continuing health insurance, and certain fringe benefits. Vacation and sick leave can be considered earnings in some cases depending on the employer’s policies.
Inclusion of vacation and sick pay
A claimant’s vacation or sick leave should not be included in the calculation of average weekly wage if it is subject to forfeiture and not a cash equivalent. For the leave to be considered wages, they must have a “reasonable, present day, cash equivalent value.” On the contrary, average weekly wage would include vacation and sick leave if there is no cap or limit on it, it does not expire, and it has a cash equivalent.
Some factors the court will consider when determine whether the vacation and sick leave pay should be included in the average weekly wage include:
- If the claimant were terminated at any time, would the claimant be paid for any vacation or sick leave that the claimant has accrued?
- Does the vacation or sick leave expire or can the claimant roll over 100% every year?
- If the claimant does not use the vacation or sick leave, is it paid out or is it forfeited?
- Can the claimant request payment for the vacation or sick leave at any time?
If the vacation or sick leave has no limit, never expires, is not forfeited, and is paid to the claimant upon termination or at their request, then it should be included in the average weekly wage at the same rate it is accrued. For example, if a claimant earns 2 hours of vacation and 1 hour of sick leave per week, then the claimant’s average weekly wage should be increased by 3 hours of pay. However, if the vacation or sick leave is limited, expires each year, and is not paid upon termination or upon request, then the average weekly wage should not be increased for earning vacation and sick pay.
If the claimant accrues vacation or sick pay per pay period, then discovery needs to be done to determine if the average weekly wage should be increased to account for this fringe benefits. However, the average weekly wage should only be increased if the vacation or sick pay has no limit, never expires, is not forfeited, and is paid to the claimant upon termination or at their request.
For further questions on this topic, please contact one of our attorneys at 720-488-9586.