Handling Sick Leave and PTO During a Dental Practice Transition in Colorado

When buying or selling a dental practice in Colorado, one area that often creates confusion at closing is how employee benefits such as sick leave and paid time off are handled. While these benefits may seem similar, Colorado law treats them very differently, and understanding those differences is critical to avoiding unexpected costs or compliance issues. This discussion applies specifically to Colorado.

Colorado Sick Leave Requirements Under HFWA

Colorado requires employers to provide paid sick leave under the Healthy Families and Workplaces Act (HFWA), enacted through House Bill 20 1415. This law applies to all employees, not just full time staff. Employees accrue sick leave at a rate of 1 hour for every 30 hours worked, up to 48 hours per year. Any unused sick leave carries forward into future years, although employers are not required to allow employees to use more than 48 hours in a single year. A key distinction is that sick leave is not treated as earned wages. Because of this, unused sick leave is not paid out when employment ends. However, in a practice transition where employees continue working under the new owner, Colorado law requires that accrued sick leave balances carry forward. This means the buyer assumes responsibility for those balances.

How PTO Is Treated Differently in Colorado

Paid time off is handled very differently under Colorado law. PTO is generally considered earned compensation once it is accrued. As a result, accrued PTO must typically be paid out upon separation, unless the employer has a clearly defined written policy that complies with Colorado wage law. In a dental practice sale, employees are often treated as separating from the seller and then being rehired by the buyer. Because of this, any accrued PTO is usually addressed at closing and becomes a financial responsibility that must be accounted for in the transaction.

Dental Practice Transition Planning for Sick Leave and PTO

To avoid surprises during a transition, both buyers and sellers should review these items early in the process:

• Confirm sick leave tracking Ensure compliance with HFWA and verify accurate accrual records.
• Review PTO balances Identify total accrued PTO that may need to be paid out at closing.
• Determine responsibility Decide whether PTO will be paid by the seller or credited to the buyer as part of the transaction.
• Plan for sick leave transfer Confirm that accrued sick leave balances will carry forward and be assumed by the buyer.

Addressing these items early helps ensure a smoother transition, reduces last minute financial adjustments, and keeps both parties compliant with Colorado law.

Key Legal Takeaways for Colorado Dental Practice Transitions

• Sick leave is mandatory All employees must be provided paid sick leave under HFWA.
• Accrual rate Employees earn 1 hour of sick leave for every 30 hours worked.
• Annual cap Employers may cap accrual at 48 hours per year.
• Carryover rules Unused sick leave carries forward, but usage can be limited to 48 hours per year.
• No payout requirement Sick leave is not paid out at termination.
• Buyer responsibility The buyer assumes accrued sick leave balances when employees continue employment after a transition.
• PTO treatment PTO is typically treated as earned wages and must be addressed at closing.

Reference

The governing law is the Colorado Healthy Families and Workplaces Act (HFWA).
Citation: C.R.S. § 8 13.3 401 to 8 13.3 418
Enacted through HB20 1415

More information can be found at the Colorado Department of Labor and Employment website: https://cdle.colorado.gov/hfwa