Maine vacation payouts

Maine amends law to require vacation payouts

Changes are coming in Maine, as a law has been amended to require vacation payouts for certain employers. On April 7th, 2022, Governor Janet Mills signed “An Act Regarding the Treatment of Vacation Time upon the Cessation of Employment” into law. This act deals with how employers must handle unused vacation pay upon separation of employment. Let’s take a look at these changes.

What are the changes to the law?

Effective January 1st, 2023, this amendment requires employers with more than 10 employees to pay out any unused, accrued paid vacation time to employees upon separation from the company. State law requires employers to pay employees their final wages in full no later than the employee’s next payday. Unused, accrued vacation pay abides by the final wages ruling and must be paid out in the same manner.

Details of the new vacation payout law

  • These changes are effective January 1st, 2023.
  • This new requirement applies to all private businesses in Maine with more than 10 employees.
  • Unused, accrued vacation time must be paid out in full no later than the employee’s next payday.
  • Vacation time must be paid out regardless for the reason of separation.
  • At this time, the law does not clarify if this covers all types of leave or just vacation leave. The law simply states, “unused paid vacation accrued pursuant to the employer’s vacation policy.”
  • Exemptions from this new law are employers with 10 or less employees, public employers, and final wage vacation pay provisions governed by a collective bargaining agreement.
  • This is in contradiction to the Maine Earned Paid Leave Law, in which payout of earned time upon employee termination was determined by your policy.

How should employers handle these changes?

Employers in Maine that are subject to these new requirements should make changes to their processes and procedures. Updating or creating a policy to have in a company handbook is key to maintaining compliance. Also, be prepared financially to pay out any unused, accrued time to employees upon separation of employment. Furthermore, employers who fail to comply with this law are subject to interest payments, fines and penalties.

If you have any questions regarding these changes, please reach out to your payroll processor.

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