A Maine vacation pay law requires most employers to pay out all unused, accrued vacation to separated employees starting Jan. 1, 2023.
The payment of such unused PTO is required regardless of an employer’s policy to the contrary. Maine passed the law in April 2022.
It applies to private employers with 11 or more workers. Also, public employers are not covered under the law.
Previously, employers could choose whether to pay out unused, accrued vacation.
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Maine Vacation Pay Law
While the law does not apply to smaller employers and public employers, it also may not apply if a company has a collective bargaining agreement that addresses payment of vacation pay upon the ending of employment.
The state department of labor has provided some guidance for employers regarding the Maine vacation pay law.
While the statute does not define “accrual” or “accrued,” state officials consider 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.”
This can include employees who accrue a certain number of hours per pay period or days per month, for example.
Whether frontloaded vacation time is accrued depends on the employer’s policy or established practice, according to the Maine Department of Labor.
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.
Without a clear policy, the state generally assumes frontloaded vacation time is accrued. Officials “strongly” recommend that employers that use frontloading should have a clear written policy.
Unlimited Vacation Policies
If an employer has an unlimited vacation policy, it could be considered accrued “if the employee has a defined amount of time that is available to them at any given time.”
Does the statute require that accrued vacation roll over from year to year?
The law only requires that employers pay accrued, unused vacation at the time of separation.
Related: Colorado Employers Must Pay Out Unused Vacation Time
Lastly, existing Maine law provides for restitution (and fines from the state department of labor) for unpaid wages. And effective Jan. 1, 2023, that includes nonpayment of accrued vacation pay.
Employees who do not receive pay for their unused vacation time can sue their employers and seek damages in an amount of up to three times the unpaid figure, as well as interest and attorney fees.
As a reminder for employers, minimum wage in Maine, effective Jan. 1, 2023, is $13.80.
State Minimum Wage Rates 2023
Employers that have locations in the state should review their separation policies to ensure they align with the Maine vacation pay law.
And a written policy regarding vacation payout, especially related to the guidance regarding the law, should likely be reviewed or revised as needed.