Maine's governor recently signed H.P. 160 - L.D. 225, amending the state's final wages statute to require that "[a]ll unused paid vacation accrued pursuant to the employer's vacation policy on and after January 1, 2023 must be paid to the employee on cessation of employment." The amendment provides that private employers with 11 or more employees must pay all unused vacation to a separated employee at the cessation of employment regardless of the employer's policy; payment must made in full no later than the employee's next established payday. The changes take effect July 19, 2022.

The payout requirement will not apply to public employers. Additionally, if a collective bargaining agreement governs an employee's employment and addresses vacation payout when employment ends, the CBA, not the statute, will determine vacation payout requirements. These new provisions also apply when a company sells its business under a separate part of the statute, treating a sale of a business the same as any other "cessation of employment."

With these amendments, Maine joins a small group of states that limit an employer's ability not to pay out vacation when employment ends, and an even more exclusive list of states whose prohibition against vacation forfeiture comes via a statute or regulation rather than a court decision (including, but not limited to, California, Illinois, and Rhode Island). Additionally, by virtue of these amendments, Maine likely will become the first jurisdiction in...

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