Maine’s Vacation Law Will Now Require Payout Upon Separation

Recently, Governor Janet Mills of Maine signed H.P. 160 - L.D. 225, “An Act Regarding the Treatment of Vacation Time Upon the Cessation of Employment,” which amends Maine’s final wage statute to require the payout of unused, accrued vacation time upon separation for Maine employees (the “Act”).  This amendment makes Maine one of a small number of states mandating the payment of unused, accrued vacation upon termination.  While the Act goes into effect on July 19, 2022, Maine employers have until January 1, 2023 to comply with the requirements of the amended Act.  

Here are some of the important highlights:

• Covered Employers: The amended Act applies to all private employers with 10 or more employees. The amended Act does not state whether the 10 or more employees threshold counts only those employees within the state of Maine or all employees nationwide. The Act does not apply to public employers within the state.
• Definition of “Vacation”: The amended Act does not define “vacation” time. Therefore, it is not apparent from the statute if it will apply to general paid time off (PTO) policies.
• Penalties: The amended Act treats violations for unpaid accrued vacation time the same as for other unpaid wages. Thus, violations of the Act could result in payment of the unpaid accrued vacation time, as well as liquidated damages equal to double the amount of unpaid accrued vacation time, and attorney’s fees and costs.
• CBAs: 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 the payout requirements of the Act.

Coordination with Maine’s Earned Paid Leave Law. Importantly, the amended Act appears to conflict with the Maine Earned Paid Leave Law (“MEPLL”).  The MEPLL, which went into effect on January 1, 2021, establishes a minimum standard for paid time off for employees in the state. The MEPLL Rules provide that if an employer has a policy of paying out unused, earned paid leave time upon separation of employment, then they must similarly pay out MEPL at separation as well.  The MEPLL FAQs state “If you currently have a vacation policy that states the unused balance of vacation time will be paid at the time of separation (and you don’t have a separate Earned Paid Leave policy) then you will be required to pay the unused vacation and Earned Paid Leave balances. If you have a vacation policy that states the unused vacation balance is not paid at the time of separation, then the Earned Paid Leave balance will not need to be paid.”  Therefore, it appears the amended Act conflicts with current MEPL requirements regarding treatment of earned, unused time off at separation. It is quite possible the amended Act will change the way employers must handle pay out of MEPL under their current policies.  We are hopeful the Maine DOL will provide guidance on the relationship between the amended Act and the MEPLL prior to January 1, 2023.

Next Steps. While employers have until January 1, 2023 to comply with the requirements of the amended Act, they should start taking steps to comply before its effective date, including:

• Review any existing paid time off, vacation and MEPL policies and either implement new policies or revise existing policies to satisfy the amended Act;
• Monitor the Maine Department of Labor’s website for information on the final wage payment requirements and any updates to the requirements for MEPL; and
• Train supervisory and managerial employees, as well as HR, on the new requirements.

We will continue to monitor and provide updates on any developments as the amended statute’s effective date approaches. With the paid leave landscape continuing to rapidly expand and grow in complexity, we encourage companies to reach out to their Seyfarth contact for solutions and recommendations for addressing compliance with paid leave requirements.

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