A law related to pay for vacation time at the end of employment that was enacted in April has the potential to cause confusion and raise costs for some businesses in the state.
Gov. Janet Mills signed LD 225 into law on April 7. At the cessation of employment, the law requires employers to pay departing employees “all unused paid vacation accrued pursuant to the employer’s vacation policy on or after January 1, 2023.”
LD 225 does not apply to businesses with 10 or fewer employees, public sector employers, or employees governed by a collective bargaining agreement. The law does not distinguish between employees who choose to leave their jobs and those who are fired.
Prior to LD 225 becoming law, if a person’s terms of employment included provisions for paid vacation, it had the same status as earned wages.
LD 225 conflicts with the state’s earned paid leave law, which Mills signed on May 28, 2019 and which went into effect on January 1, 2021. LD 369, the bill mandating earned paid leave, requires private employers with 10 or more employees to provide one hour of paid leave for every 40 hours an individual works. The law caps earned paid leave at 40 hours per year and does not require an employer to permit its use until an employee has worked for 120 days in a one-year period.
The law also requires that an employee using paid leave must be paid the same base rate of pay as he or she received immediately before taking leave. Barring an emergency, paid leave must be scheduled...
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