July 17, 2019

Reasonably Ascertainable Value of Accrued Vacation and Accrued Sick Leave May Be Divided in Dissolution of Marriage

PFM Individual Photos LWMBy Lesleigh W. Monahan

On January 13, 2014, the Colorado Supreme Court issued its opinion in In re Marriage of Cardona and Castro. The supreme court granted certiorari review in this case to consider whether accrued vacation and sick leave may be considered marital property subject to division under C.R.S. § 14-10-113 of the Uniform Dissolution of Marriage Act (UDMA). The court considered this issue a matter of first impression in Colorado, noting, as did the court of appeals, that courts in other jurisdictions are split on this issue.

In Marriage of Cardona and Castro, wife raised the issue of husband’s accrued leave. The husband’s accrued leave had been reflected in his most recent pay stub, which indicated the total number of hours of vacation time and sick time that had accrued up until the date of dissolution. The pay stub did not indicate the cash value of the accrued leave or whether husband was entitled to cash payment for any portion of the leave. At the permanent orders hearing, the wife did not establish, nor did the husband render an opinion as to, whether husband was entitled to cash payment for any portion of the leave. In fact, the husband’s statements at the permanent orders hearing were somewhat vague and ambiguous as to his expectations—other than that he would be entitled to some form of pay for his accrued leave at the time of his termination.

The wife thereafter took the position that the husband’s accrued leave should be valued at $23,230.00. The trial court chose to divide the value of husband’s accrued vacation and sick leave as part of its division of the marital estate and required husband to pay wife $11,616.00 for “her interest in this pay.”

On appeal (which included additional issues other than those raised in the most recent supreme court opinion), the husband argued that accrued leave is not marital property. The divided panel of the court of appeals agreed and reversed. The majority reasoned that husband’s accrued leave was analogous to unvested stock options or an interest in a discretionary trust and “is thus not property subject to distribution on dissolution.” The case was remanded with direction to the trial court to reconsider the property division without considering husband’s accrued vacation and sick time. A petition for writ of certiorari, filed by wife, was granted on the following issue: “Whether the Court of Appeals erred in finding that accrued vacation and sick leave time is not marital property subject to division pursuant to section 14-10-113, C.R.S. (2010).”

The supreme court, in considering case law from other jurisdictions and relevant Colorado precedent, concluded that where a spouse has an enforceable right to be paid for accrued vacation or sick leave, as established by an employment agreement or policy, such accrued leave earned during the marriage is marital property for purposes of the UDMA. The court clarified that the value of such accrued leave at the time of dissolution must be equitably divided as part of the marital estate as long as such value can be reasonably ascertained at the time of dissolution. Alternatively, when a court cannot reasonably ascertain the value of such leave at the time of dissolution, the court should consider a spouse’s right to such leave as an economic circumstance of the parties when equitably dividing the marital estate. The supreme court found that there was not any competent evidence presented in the Cardona and Castro matter to establish that husband had an enforceable right to payment for his accrued leave and, accordingly, determined the trial court erred in considering the purported cash value of such leave as part of the marital estate. The court of appeals judgment was affirmed on narrower grounds.

The importance of this case to practitioners is clear in terms of trial preparation. As with other marital assets such as real estate, businesses, and retirement plans, it is essential for the practitioner to obtain accurate documentation and/or testimony from reliable sources such as the employer (as witness) and employer policies and procedures (as exhibits) relative to valuation of accrued sick time and leave. Based upon the detailed analysis in the supreme court decision, it will be critical for the trial court to assess whether the “value” of accrued vacation or sick leave, at the time of dissolution, may be so difficult to ascertain as to be speculative. Under many employment policies, different types of leave may be combined in one comprehensive paid time off plan, whereas other policies split vacation leave, sick leave, and personal leave into separate plans. Some employers allow leave to accrue and “roll over” from year to year, while others adopt a “use it or lose it” approach, under which accrued leave is forfeited if the employee does not take time off. Therefore, under this ruling, it is clear that accurate, demonstrative, and probative evidence must be presented to the trial court as to whether the value of accrued leave can be determined through a reasonable dollar estimate. If such an estimate cannot be demonstrated, it is clear that the accrued leave has speculative value that could lead a trial court to treat such leave as an “economic circumstance” under C.R.S. § 14-10-113(1)(c).

Justice Boatright concurred in the opinion but wrote separately to express two perceived errors in the reasoning of the majority opinion. The first relates to the inequity of “double counting” of accrued leave as both income and property. The second concern articulated by Justice Boatwright is that the ruling presents a contradiction in that “unlike calculating the present value of a pension, it will be nearly impossible to determine the present value of accrued leave.” Analysis would require consideration of a “bevy of speculative and indeterminate factors such as future illness, vacations, company policy, lifestyle changes, job changes, family needs and retirement.” In summary, the difficulties of valuing accrued leave led Justice Boatwright to the conclusion that it should be treated as income if the court orders child support and maintenance. Alternatively, if the court does not order child support or maintenance, it should only consider accrued leave as an “economic circumstance.”

Lesleigh W. Monahan, Esq. is a partner in the Lakewood firm of Polidori, Franklin & Monahan, LLC. Ms. Monahan has been practicing law exclusively in domestic relations since 1988. She received her Juris Doctor degree from the University of Colorado School of Law in 1987. Ms. Monahan has repeatedly been recognized for her accomplishments, and is a frequent speaker at continuing legal education programs. She was admitted as a Fellow in the American Academy of Matrimonial Lawyers in 2004 and was president of the Colorado chapter in 2011/2012. Ms. Monahan is also a member of the CBA Family Law Section, and was chair of that section’s executive council in 2002-2003.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

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