Maine vacation payout law goes into effect

Oftentimes, a new year brings changes to state and local laws, and this year is no different. Most Maine employers are now required to payout accrued vacation upon separation of employment. Employers should read up on the new law and consider making changes to their vacation and leave policies.

The fine print

In 2022, the Maine Legislature amended Maine’s law on cessation of employment to address the circumstances in which vacation must be paid to employees. Effective on January 1, 2023, employers who allow employees to accrue vacation may not have a policy or established practice that prohibits all unused, accrued vacation from being paid to an employee upon termination.

Only private employers with 11 or more employees who live and work in Maine must comply with the law. In the event employees are subject to a collective bargaining agreement that includes provisions addressing payment of vacation pay upon termination of employment, the collective bargaining agreement supersedes the new law.

The new law doesn’t require employers to allow employees to accrue vacation. Perhaps most notably, only unused, accrued vacation time is due to be paid out on separation of employment. Earned paid leave, for example, isn’t subject to payout, unless an employer’s policy doesn’t differentiate between types of leave.

Employers may have separate vacation and earned paid leave policies. Employers may also cap the amount of vacation time that an employee may accrue, which necessarily caps payout of that vacation time. Caps of vacation accrual should be addressed in an employer’s policy.