vacation payout at termination?

At the begining of the year, I was provided notification that the law changed for vacation payouts at termination.   Our policy said that you only recieved that payout if you have been employeed for a least one year.  The information I was given said that regardless what your policy says, if vacation is accrued you MUST pay it out on the last paycheck.   So, I started to payout vacation to all employees.  My boss questioned me on this so I explained to him the change.  He didn't agree, so he researched it and came back to me saying that the law had not passed and wan't going to pass; discontinue to payout the vacation.  So, I did.  But now this is being challenged within our organization.  I'm getting conflicting info from the State labor board and the Federal.  What is the law?


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  • In the state of MD there has been a lot going on with this issue.  Based on unpublished court decision in 2007 in MD, the MD Wage and Hour changed the rules to say that even if you had a policy in effect saying you did not have to pay out unused vacation that you must now pay it out. Employers went nuts, so during the General Session, the MD legislators enacted Senate Bill 797, that allows employers to pay or not pay dependent on a policy that they have distributed to all employees.  Your information was correct until this law passed.

    Below is an article related to this.  It is in the April 2008 edition. (As a side note, you may want to sign up to receive this newsletter. They typically have some good info related to MD).


    Let me know if you need more info on this.

  • ITHR,

    So, there is no Federal law? It was just going to be state but they put a stop to it...correct?




  • Right, there is no federal law that says that private employers even have to give their employees vacation or sick benefits. 

    This law is a state specific law for MD.

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