Vacation Payout

Employers that have 11 or more employees will be required to pay out accrued but unused vacation time at the end of employment.

The Maine Department of Labor (MDOL) will consider frontloaded vacation to be accrued unless your policy specifically says that frontloaded vacation is an advance against future accruals, in which case employers will still need to pay out a prorated amount. Vacation that was accrued before January 1, 2023, only has to be paid out if you had a policy or practice of paying out vacation at termination. Collective bargaining agreements can establish their own vacation payout requirements.

You might be wondering how this new requirement interacts with Maine’s earned paid leave law. The MDOL explains in guidance that the requirement to pay out unused vacation when an employee separates from employment only applies to vacation. Employers only have to pay out unused earned paid leave at the end of employment if they have a policy or practice of doing so.

The guidance also says that the MDOL will only enforce the payout requirements for employers that have 11 or more employees in Maine. However, the law doesn’t limit the employee count to those in the state, so we recommend consulting with an employment attorney if you have fewer than 11 employees in Maine, but 11 or more total, and don’t plan on paying unused vacation upon separation of employment.