Maine’s final pay law is now in effect.
The state passed the law in the spring of 2022. It requires employers with 11 or more workers to pay terminated employees all unused, paid vacation accrued at the time of separation.
It went into effect Jan. 1, 2023.
Maine Final Pay Law
Previously, employers could choose whether to pay out unused, accrued vacation time.
Now, the payment of such unused PTO is required regardless of an employer’s policy to the contrary.
Meanwhile, the law also expanded employer liability to include all accrued vacation pay owed when employment ends, plus interest, double the unpaid wages and the accrued vacation pay as liquidated damages.
Maine officials have provided guidance about the final pay law.
Is ‘Accrual’ Defined?
The statute does not define “accrual” or “accrued.”
However, the law considers vacation time to be accrued “if the employee has a defined amount of time that is available to them at any given time, even if that amount may, at times, be zero.”
Many companies have policies in place that allow workers to accrue a certain number of hours per pay period or days per month, which would have to be calculated at the time of termination.
What About Frontloading?
The Maine Department of Labor says whether frontloaded vacation time is accrued depends on the employer’s policy or established practice. From the state guidance:
“If the policy states that employees are credited with vacation as an advance against future accruals, the employer will be obligated to pay out all unused vacation which would have accrued at the time of separation – the employer is not obligated to pay out for unused vacation which would not yet have been accrued. If the employee used more time than would have been accrued at the time of separation, in this limited circumstance, the employer may deduct the amount of used, unaccrued time that exceeded what would have been accrued at the time of separation from the employee’s last paycheck.”
State officials say, without a clear company policy, they will generally assume frontloaded vacation time is accrued. Employers are encouraged to address frontloading in company vacation policies.
Unlimited Vacation Time?
If an employer has a policy that allows for vacation, it could be considered accrued “if the employee has a defined amount of time that is available to them at any given time.”
What About Rollover?
The Maine final pay law only requires that employers pay accrued, unused vacation at the time of separation.
Lastly, the law does not apply to smaller employers and public employers, and it also may not apply if a company has a collective bargaining agreement that addresses payment of vacation pay upon the ending of employment.
Employment Law Compliance
The rise of employee-friendly legislation in recent years has created a number of challenges, and they extend beyond minimum wage and paid leave management, as is the case with Maine’s final pay law.
Plus, it is worth noting that courts have also often sided with employees in these matters, as was the case with Colorado’s law regarding the payment of accrued, unused vacation time.
Employers that operate across the U.S. should evaluate the laws that apply to their locations to ensure compliance.
Why ZIP Codes Don’t Cut It for Employment Law
Employers with locations in the state should review their separation policies to ensure compliance with the Maine final pay law.
As a reminder, it has been in effect since the beginning of 2023 and applies to employers with 11 or more employees.