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You're entitled to be paid out for your vacation time—but there's a catch.


employee is paid for his accrued vacation leave

Here's a question we get a lot at the Employment Law Center of Maryland: "do they have to pay me for my unused vacation time?" The short answer is yes; but there's a loophole that savvy Maryland employers take advantage of. Let's get into the details.


Background


The Maryland Wage Payment and Collection Law, Md. Code, Lab. & Empl. § 3-501 et seq., states that Maryland employers pay separated employees all their accrued "wages," regardless of whether you were terminated or resigned. But is your accrued vacation time a wage? In 2007, the Maryland Court of Special Appeals answered that question with a definitive yes in an unpublished opinion, Catapult Technology, LTD v. Paul Wolfe, No. 997 (Aug. 20, 2007).


In 2007, the Maryland Court of Special Appeals ruled that accrued leave was a wage, and must be paid out upon separation.

Employers scrambled, realizing that they were now obligated to pay out significant leave balances to separated employees. The Maryland legislature bailed employers out during an emergency session in 2008, legislatively overruling the Catapult Technology case and amending the Maryland code to its current state.


Today


The general rule today, as set forth in Md. Code, Lab. & Empl. § 3-505, is that a Maryland employer must still pay out any unused leave upon separation.


Generally, a Maryland employer must still pay out any unused leave upon separation.

However, there's a significant addition to § 3-505, which states:


(b) An employer is not required to pay accrued leave to an employee if:


(1) the employer has a written policy that limits the compensation of accrued leave to employees;


(2) the employer notified the employee of the employer's leave benefits in accordance with § 3-504(a)(1) of this subtitle; and


(3) the employee is not entitled to payment for accrued leave at termination under the terms of the employer's written policy.


This provision gives Maryland employers the option of limiting your right to be paid for your accrued leave in an employee handbook, etc., and many Maryland employers take advantage of this. Importantly, pursuant to Md. Code, Lab. & Empl. § 3-504(a)(1), the policy must have been provided to you at the time of hiring.


For a policy limiting your right to be paid for accrued leave to be effective, it must have been provided to you at the time of your hiring.

Bottom Line


It's pretty easy to figure out whether you're entitled to be paid for your accrued leave—look at your employee handbook, and see if:


  1. your employer has a written policy limiting your right to be paid for your accrued leave; and,

  2. you were provided a copy of the policy at the time of your hiring.

If both of those things are true, you're out of luck. But if your employer failed to do at least one of those things, you are absolutely entitled to be paid for your accrued leave, and pursuant to the Maryland Wage Payment and Collection Law, you're entitled to be paid for it "on or before" your next regular payday. Md. Code, Lab. & Empl. § 3-505(a).


If you are entitled to be paid for your accrued leave, your employer has to pay it by what would have been your next regular payday.

All this sound like legalese to you? Get in touch with us at the Employment Law Center of Maryland, where it's always free to talk to a Maryland employment lawyer about your situation. We're here to help.