Monday, August 25, 2008

Change in Maryland Wage Payment Law

Another example that goes to show that you must be careful of what you read on the Internet.

In 2006, several former employees of Catapult Technologies represented by my law partner, Marc Smith, sued their employer for the value of their unused accrued vacation pay. The employees prevailed and the decision was affirmed on appeal by the Maryland Court of Special Appeals in an unpublished decision.

The Maryland Department of Labor Licensing and Regulation, which oversees Maryland’s employment policies and the like was informed of the Court decision. In response, the DLLR updated its policy/regulations to now include vacation leave as “wages” that must be paid to terminated employees. This change in policy based on the Catapult case was written up in many employment law blogs and still remains on those blogs.

Once DLLR updated its policy/regulations on this, some large Maryland employers complained to their representatives in the state legislature, etc., and the law was clarified and changed.

Specifically, Section 3-505 of the Labor and Employment Article of the Maryland Annotated Code was amended effective April 24, 2008 so that it now provides:

§ 3-505. Payment on cessation of employment

(a) Except as provided in subsection (b) of this section, each employer shall pay an employee or the authorized representative of an employee all wages due for work that the employee performed before the termination of employment, on or before the day on which the employee would have been paid the wages if the employment had not been terminated.

(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.

In sum, despite what it may say in an employment lawyer’s blog or on his website, the law now is that unused vacation pay does not constitute wages that are required to be paid at the termination of employment so long as the written company policy on such leave clearly provides that vacation pay will not be paid out at termination of employment and so long as that written policy has been provided to the employee. If you do not have a written policy, you should seek counsel to create one for you.

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