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Change in MD Accrued Vacation Law Maryland

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  • Change in MD Accrued Vacation Law Maryland

    All, looking for opinions on new case law.

    In Catapult Technology, Ltd. v. Paul Wolf, et. al., Maryland case law now defines accrued vacation time as wages and must be paid out on termination regardless of employer policy regarding limits on payout (two weeks notice, not termed for misconduct, etc).

    We currently offer Vacation, Sick, and Personal Leave accrued over time. To my reading of the decision, ALL of this would now be considered wages to be paid out at termination. We are considering changing to a PTO bank (to make things easier to track) and changing our "use it or lose it" policy and carry-over of leave.

    Does anyone have any thoughts on establishing a PTO bank vs. separate accruals? I have done some research on PTO Banks and that seems to be the way most companies are going. Anyone have any experience switching a company from one to the other? Employee responses?


  • #2
    My state has always required the payout of unused vacation/PTO and I've converted two companies from vacation/sick/personal to PTO.

    The most immediate response we noticed is that sick leave abuse went WAY down. (This was a serious problem at one of the two companies - there was very little abuse at the other. Nonetheless, there was a significant reduction at both companies.) It didn't take the employees long to figure out that the more times they called in sick with a minor ailment, the fewer days they had when they wanted to go to Disneyworld.

    I had one employee at the first location who evidently believed that he was getting additional vacation and would still retain all his sick days, and when he found out otherwise he claimed he had never been told how it would work. He shut up quickly when I provided a copy of the explanation that had been provided - with his signature on it.

    At the other company, somehow or other some of the employees got the idea that they would have to use PTO for all the time they were out on short term disability. (This was the company with very little sick time abuse.) Once they finally understood that they would still only have to use PTO for the seven day waiting period the policy required, they had no further objections.

    We had a cap on how much PTO could be banked before they stopped accruing any new time. This was seen by some as "taking PTO away" but since we'd had that same cap, and the same objection, when it was vacation time, we didn't consider that a reaction to the new policy.

    Over all, we really didn't end up paying out that much more as PTO than we did as vacation.
    Last edited by cbg; 02-01-2009, 10:58 AM.
    The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.


    • #3
      To somewhat change the subject, the case mentioned brings up a good point. The absence of a law requring that employers must pay out unused vacation balances on termination is not the same thing as the presence of a law saying that employers do not have to pay out unused vacation balances on termination. Some employers assume that absence of laws are always to the employer's advantage. As this case illustrates, this is not always the case. Often absence of law just means that no one knows what the rules will end up being.
      "Reality is that which, when you stop believing in it, doesn't go away".
      Philip K. **** (1928-1982)


      • #4
        Maryland is a bit conflicted on the vacation pay out issue. For years the DLLR has taken a dim view of use it or lose it policies and conditional pay outs. The feeling was that you either treat it as wages or you don't. If you don't, fine but you need to communicate it up front.

        The outcome of this case was not a tremendous surprise. What was a surprise was the DLLR's change in regulation just a few weeks ago. One would expect a major change such as this to be well publicized but alas, that would have made sense. Though the legislature specifically defeated for the umpteenth time legislation which would make payout of vacation mandatory, the DLLR changed its regulation to require the payout of vacation. Jury is out (pardon the pun) on how this will play out in the long run. has the new regulation.

        Before making any policy changes, I'd consult legal counsel. And, stayed tuned to the latest from Annapolis as I assure you there will be legislation proposed on both sides of this issue.
        I post with the full knowledge and support of my employer, though the opinions rendered are my own and not necessarily representative of their position. In other words, I'm a free agent.


        • #5

          Thanks for the info. A couple of questions for you:

          1. What is the cap on PTO accrual at your company and how do you handle any overages at the end of the year? Do your employees just lose it or do you pay out? I believe with this new interpretation, we would have to pay out any unused, over-the-cap PTO at the end of the year.

          2. Is there any possibility that you could PM me a copy of the new policy letter that you used? I'm sure that you have already had to address numerous issues that I haven't even thought of (such as the PTO with STD question)?


          I understand what you are saying about the lack of a law not meaning that something is legal. That's why I tend to get worried when I see some of the regular posters on here tell someone that something is legal because there is no law against it. I prefer to think of it as something is considered legal because no court has interpreted the relevant law to make it illegal. If a policy is challenged, it might make something illegal that was commonly thought to be legal (as with this case).

          On a side note, one of the worst things about this case is that the law firm tried to get the company hit with treble damages when the company in question was merely following the DLLR's guidance.


          I agree with you completely about the notification issue. The state did not do much at all (read: nothing ) in the way of notification of this change in interpretation. I will keep an eye on happenings in Annapolis to see what happens, but I think I am going to switch my company to a PTO bank regardless. Just seems simpler to administrate. Do you have a website, RSS feed or something similar that updates you about Maryland HR issues?

          Thanks for the replies. If anyone else has any ideas, concerns, good results or horror stories about PTO banks, post away.


          • #6
            I'm no longer employed by either of the companies where I did the PTO conversion. In fact, neither of those companies exists any longer. In my current position, I do not manage the benefits program - my roll is more of an employee relations/consulting one - and in any case, we still have a straight vacation policy. In my state, payout of PTO/vacation is mandatory and always has been. We did not pay out at the end of the year; we allowed employees to roll over from one year to the other and paid out only on termination. However, when they had a total of 20 days saved (17 at the first company), we did not allow them to accrue any more time until they had used some. I'm not familiar enough with MD law (which has changed since I last had employees in MD) to say if you would be able to roll over as well, or if you would have to pay out at the end of the year. I'm sure Elle will be able to say. I'm sorry, but I no longer have a copy of the letter we used. When the companies in question closed, I saved a lot of the materials I used but that was not among them, sorry. But I'm happy to answer any questions you have and if I think of anything I've left out, I'll either post it here or send you a PM.
            The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.


            • #7

              The only questions I really have is what the employees reactions were when you told them of the change in policy? Were there any oddball, out-of-left-field comments or concerns? Were the employees OK with the change? Anything unusual that came to light after implementation of the new policy?

              Thanks for the help. I do appreciate it (and I think our employees will to).


              • #8
                The only employee reactions that stand out in my mind are the ones I mentioned in my first post. Other than that it was pretty much business as usual.
                The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.


                • #9
                  As far as I know, carrying over leave from year to year is still allowed, as is capping the total amount that can be earned. Of course, given the way the DLLR is operating these days, who knows? Until 3 weeks ago it was perfectly legal to not pay out vacation at all. Almost makes me think Ehrlich was onto something when the wage and hour division was belly up for a while there.

                  As for resources, mine are a bit more personal than a newsletter, but there are several good ones out there as well. HR Hero comes to mind as does MD Employment Law Letter. I'm not affiliated with either, and as I said, I get most of my updates from lawyers and politicians I know.
                  I post with the full knowledge and support of my employer, though the opinions rendered are my own and not necessarily representative of their position. In other words, I'm a free agent.


                  The forum is intended for informational use only and should not be relied upon and is not a substitute for legal advice. The information contained on are opinions and suggestions of members and is not a representation of the opinions of does not warrant or vouch for the accuracy, completeness or usefulness of any postings or the qualifications of any person responding. Please consult a legal expert or seek the services of an attorney in your area for more accuracy on your specific situation.