On April 7, 2022, Governor Mills signed into law L.D. 225, titled “An Act Regarding the Treatment of Vacation Time upon the Cessation of Employment.” This is a very significant change. It amends the current vacation leave payment law in Maine to require employers with more than ten employees to pay employees, on the cessation of employment, all unused paid vacation accrued pursuant to the employer’s vacation policy on and after January 1, 2023.
The specific language of the amendment provides that:
All unused paid vacation accrued pursuant to the employer’s vacation policy on and after January 1, 2023 must be paid to the employee on cessation of employment unless the employee is employed by an employer with 10 or fewer employees or by a public employer. If the employee’s employment is governed by a collective bargaining agreement that includes provisions addressing payment of vacation pay upon cessation of employment, the collective bargaining agreement supersedes this paragraph
The language does not define what “vacation” time means. This is especially troublesome for employers who have adopted a general PTO policy, without distinguishing vacation from sick time. It is also not clear how this provision is going to interact with Maine’s Earned Paid leave law time. The plain language of the law also does not provide an “out” for situations where an employee is terminated for any reason and suggests that regardless of the circumstances under which the employee leaves employment, he/she is entitled to that accrued time.
Even though the law only applies to such payouts after January 1, 2023, employers should not wait to give this their full attention. There are many questions employers will now have to consider in terms of what their policies currently provide and whether and how to amend those policies in light of this law. For instance, employers may be more strict on enforcing annual caps on vacation time or disallowing carryover of such leave, or even doing away with vacation time in its entirety. Whatever those changes, employers should evaluate their individual situations and decide how best to move forward after January 1, 2023.
Call Anne-Marie today to learn more.
Rudman Winchell