1st Circuit: In Maine, employer's policy governs vacation payouts at termination

Under Maine law, the employer's policy controls the payout of vacation time when an employee is terminated, the U.S. 1st Circuit Court of Appeals (which covers Massachusetts, Maine, New Hampshire, and Rhode Island employers) recently ruled, affirming a lower court decision. Employees have no legal right to compensation for their accrued, unused vacation time. In light of the state's new earned paid leave (EPL) law, the appellate court's ruling serves as a helpful refresher on your obligations when employees are let go.

Facts

Matthew White worked for Hewlett Packard (HP) in Kennebunk, Maine, from February 2013 until July 2015, when he voluntarily resigned. The company's vacation policy "strongly encouraged"employees to use all of their vacation time each year, and unused time generally expired on December 31 of each year. Unused vacation time was also forfeited at the time of discharge unless the employee primarily worked in an "exempt"state (California, Illinois, Massachusetts, Montana, or Nebraska), where the law requires a payout upon separation from employment.

After resigning, White asked HP when he could expect to be paid for the unused vacation time. The employer directed him to its internal policy, which didn't provide for any payment upon being separated from employment.

White remarked he thought Maine should be included in the list of exempt states and later sued HP, claiming he should receive compensation for the unused vacation time under state law. He relied on 26 M.R.S.A. § 626, the state's "cessation of employment"statute, which says: