On April 7, 2022, Maine passed a law that requires employers with more than ten (10) employees to pay terminated employees all “unused paid vacation accrued pursuant to the employer’s vacation policy on and after January 1, 2023.” Employees leaving employment must be paid out no later than the employee’s next established payday. Employees or the Maine Department of Labor can bring an action against an employer for non-compliance and an employer may be ordered to pay the accrued vacation, interest on those amounts, and liquidated damages equal to two (2) times the amount owed.

Further, the law requires an employer who sells their business to similarly pay out employees accrued vacation within two (2) weeks after the sale of a business. The seller of the business can also comply with this provision through an agreement with the buyer in which the buyer agrees to honor the seller’s vacation policy or pay out the vacation accrued under the seller’s vacation policy.

Remaining Questions

The law is unclear as to whether the ten (10) employee threshold is determined on a nationwide or statewide basis. Further, the law does not provide clear guidance on the type of vacation leave must be paid out, does not address situations where an employer provides an “unlimited” or “flexible” vacation policy, and does not address situations where an employer sets an annual cap on accrued paid vacation leave.

Impact on Employers

Maine employers should prepare to comply with this new requirement and may want to look at their current paid time off policies to clarify what accrued vacation employees are entitled to under their policy. Given the current ambiguity around the new law, employers should watch out for clarifying regulations from the state and may want to discuss this new requirement with counsel.

Additional Resources

Emerald Law — Emerald is a Senior Compliance Consultant for Sequoia, where she works with our clients to optimize and streamline benefits compliance. In her free time, Emerald enjoys stand-up comedy, live music, and writing non-fiction.