A Guide to Maine PTO Laws
The concept of Paid Time Off (PTO) generally refers to any leave that is provided to employees in addition to vacation and sick leave, such as personal days and bereavement leave. Companies who offer PTO will often combine PTO days and sick days into a single category known as General Leave or Paid Time Off (PTO) or Paid Benefit Days and provide a specific number of total of PTO days per year. This process is known as PTO banking.
PTO banking is governed by the Maine Paid Leave Laws, which were introduced and became effective in 2021. These laws guarantee workers access to Paid Time Off (PTO). Maine’s Paid Leave law applies to any employer with 11 or more employees. For employers with 1 – 10 employees, the law applies only to employers who provide paid time off, such as sick leave, or paid benefits that include sick leave.
The law allows employees to accrue paid leave up to a total of 40 hours a year and provides that employees may use accrued leave on an hourly basis. In addition, the law provides that employees are entitled to carry over accrued but unused paid leave from year to year. However, the employer may limit an employee’s total use or carry over of paid leave up to a maximum of 40 hours in a given benefit year. Employers may not, however, take away accrued paid leave from an employee and thus a negative PTO balance is prohibited.
While employers are required to allow employees to carry over up to 40 hours of paid leave from year to year, if a PTO bank is capped at a certain maximum, the employer is not required to maintain a carryover of unlimited PTO between years. Nevertheless, under Maine State Law, any PTO time accrued by an employee must be paid out when employment is terminated, regardless of the banked maximum.
Although employees are permitted to take up to 40 hours of sick leave , Maine law provides an exception for small employers with 1-10 employees: Since the earned paid leave amount is cumulative and employees are allowed to carry over up to 40 hours of unused time, employers may limit use of paid leave up to a maximum of 40 hours in a given benefit year.
In addition to the minimum 40 hours of PTO or sick leave, an employer may establish a tiered system that allocates vacation time different from PTO time. For example, an employer may establish a company policy where vacation and PTO time are accrued at different rates. An employer may establish a policy that gives a certain number of PTO hours each year and permits employees to use accrued but unused PTO hours for vacation purposes.
The law applies to PTO which provides for both the intentional and unintentional absences from work. However, the Maine Department of Labor recognizes in their Legislative presentation that businesses often include absences from work as an inherent part of various types of pay, such as severance, bonus, and holiday pay. Similarly, paid time off that employers offer to reward employees for using fewer sick days may be an inherent part of the pay-banking system and, thus, not be subject to the carryover requirement.
If an employee is entitled to a PTO payout at termination, the employer must pay the employee for all accrued but unused paid leave accrued during previous benefit years. Pursuant to 26 M.R.S. § 626(B)(2), at the end of separate 12-month periods known as benefit years, an employer may limit the amount of paid leave available to employees to 40 hours for each benefit year. However, this act does not require each employee to be carried over for an unlimited amount of time. If a PTO bank is capped at a certain maximum, the employer will not be required to maintain a carryover of unlimited PTO between years.
What is the Employer’s Responsibility Under PTO Laws?
The laws that govern Maine Paid Time Off (PTO) are ambiguous and much debated. So much so that Maine legislators introduced a bill in 2019 that would clarify that accrued PTO is considered wages under Maine law. Currently, employers may choose whether to pay out accrued leaves such as sick leave, vacation, or personal days upon termination of employment. Because of the lack of clarity, employers should consider addressing these issues in their PTO policy. As always, any PTO policy should be drafted in consultation with an attorney. If an employer has a PTO payout policy in its employee handbook, it should follow that policy even if this leads to an increased payout upon termination. Following the policy as written may be necessary to avoid a lawsuit. If an employer does not have a policy addressing payment for accrued leave, it should still pay the employee consistent with its normal pay practices to reduce the risk of litigation by the disgruntled employee after leaving.
Many employers provide some sort of PTO benefit, whether this is in the form of vacation time, a personal day, sick leave, or simply by providing traditional vacation benefits as part of the wage and hour requirements. While it is not required under Maine law to implement a PTO policy, any employer who does so must provide employees with those benefits in accordance with their PTO policy and its wage and hour policies. Although not strictly required, an employer’s policy should state whether and when employees are able to "cash-out" their unused PTO or accrued leaves. An employee’s right to payment of sick leave, vacation, or PTO upon termination of employment has been determined at common law. Danforth v. Blue Cross & Blue Shield of Maine, 679 A.2d 1361, 1362 (Me. 1996). Any unused portion of PTO on the date of termination should be paid at the employee’s final rate of pay.
Employee Rights Under the Maine PTO Payout Law
Employees in Maine are protected by state law in matters related to PTO and PTO payout. The law classifies an employee’s unused accrued PTO, vacation time, holidays and travel time paid, as wages.
The Maine Department of Labor clearly states that "Employers must pay employees for unused vacation pay, at termination, in accordance with their policy or practice. Employees are entitled to pay for any vacation time that they have earned but not been paid." If the employer’s policy is silent on unused vacation pay, Maine law provides that all accrued, unused vacation must be paid to an employee who is terminated or resigns. This provision has been interpreted by Maine courts to include all forms of PTO.
Further, Maine law protects employees from having their PTO or vacation pay docked. The law is clear and unequivocal: An employer may not take deductions from an employee’s wages unless such a deduction is permitted by statute or by the consent of the employee.
In addition to protections for workers in terms of how PTO is paid, Maine law also provides for overtime pay in the amount of 1.5 times an employee’s regular rate of pay. There are no exceptions to this rule that are specific to PTO. So, in cases where PTO is not included in pay calculations for hours worked over 40, employees have the right to sue their employers for overtime pay.
Exceptions and Variations of Payout Requirements
Although Maine has a clear stance concerning the payout of remaining PTO, there are exceptions to the rule. These exceptions need to be understood and researched before you decide what kind of policy to implement.
For instance, if an employee was able to accrue their PTO through other means than an employer-mandated system, they are not entitled to a cash payout of those funds when they leave the company. For example, if an employer allows employees to "donate" time off to others, that benefit does not have to be paid out once an employee leaves the company.
Also, if PTO is awarded to a worker solely for the purpose of continuing their health insurance after a layoff or other type of leave of absence, then it does not have to be included in a remaining PTO payout.
If your company does not offer paid time off at all and your employees are free to take unpaid leave whenever they choose, then you are off the hook when they leave the company. If a worker used unpaid time off and is not entitled to payment when they depart, it is not required that you give a payout.
If you employ fewer than 50 workers, you do not need to follow vacation pay regulations at all. However, should you decide to hold on to PTO balances and not pay them out to a departing employee, Maine law requires that you notify the Departing Employee of payment arrangements. If the employee has not received timely payment of their remaining PTO balance, companies can be fined $100 per offense, which will be awarded to the employee. Repeat offenses can cost a company as much as $500 per offense.
Recent Developments and Updates
In recent years, the landscape of Paid Time Off (PTO) in Maine has seen some significant shifts. Employers are now required to be more vigilant in aligning their PTO policies with state regulations, particularly in how PTO is accrued, used, and paid out at termination.
Employers in Maine must pay employees for unused vacation time upon separation from employment, whether termination or resignation. This requirement was reinforced in a 2017 opinion issued by the Maine Department of Labor. While this provision has not changed lately, the state’s attitude towards the concept of "reasonable notice" of resignations or terminations within the Employment Security Law has. A 2021 decision from the Maine Supreme Judicial Court has made it clear that an employer must provide reasonable notice regarding an employee’s separation if they want to avoid being responsible for paying the employee’s accrued vacation time in a lump sum upon termination . However, the law remains murky as to what "reasonable notice" actually means.
This creates uncertainty for employers, as it is not currently clear whether "reasonable notice" requires two weeks’ notice. Under federal law, for instance, an employee must give two weeks’ notice or forfeit any accrued PTO. However, the 2019 proposal to add paid family medical leave in Maine may have changed things further. The bill was passed by both the House and Senate but was vetoed by the Governor. It seems likely that Maine legislation will seek to impose a requirement of two weeks’ notice to forfeit accrued PTO in the future.
Keeping up with legislative changes and recent court rulings is imperative for Maine employers. The law is continuing to evolve and employers need to be proactive in complying with the requirements.
How Maine Compares to Other States’ PTO Laws
Maine’s Paid Time Off laws are unique and have features that can be more employee-friendly than in some other states. As noted above, Maine does not currently have any laws governing the payment of unused PTO and leaves it up to employers to either adopt a policy or practice and apply it uniformly. This is also the case in the District of Columbia, and in several of its neighboring states to the south and west: New Hampshire, Rhode Island, and Vermont. Importantly, Maine has the most employee-friendly unused PTO policy in the region. Whereas Maine leaves it up the employer to adopt a policy or practice governing the payment of unused PTO, Connecticut requires employers to pay out all accrued and unused vacation and sick for nonexempt employees and limits the amount that can be accrued for exempt employees to 10 days per year. Massachusetts, like Maine, does not require payment of unused PTO, although paying out accrued sick leave is required for termination due to illness. In New York, unused vacation does not need to be paid out unless an employer specifically includes it in its policy. So unlike Maine, employers in these states are not required to adopt a policy or practice enabling employees to receive payout of unused PTO and employers should be aware of the sometimes significant differences from what is required in Maine.
To the north of Maine, Canadian employment law provides arguably employee-friendly PTO payout rules. In Canada, whether PTO is to be paid out depends on the provincial law governing a particular province. In Quebec, employees must be compensated for earned vacation with a minimum of four percent of annual wages. In Ontario, accrued vacation pay must be paid out at least once a year. In British Columbia, an employer who terminates an employee’s employment must pay out all accrued vacation. In Alberta, if an employee gives notice of resignation, the amount of vacation pay accrued during the notice period must be paid out.
Helpful Hints for Employees and Employers
For Employees:
Whether it is through direct inquiry or through Post-Its, internal memos, employee "huddles" or otherwise, you should consider communicating to your employees that, while the law provides for the payment of accrued PTO at the termination of employment, the employer does not necessarily intend to pay for any unused PTO upon the termination of employment, that PTO is a benefit not an entitlement, and that it is up to the employee to keep track of his or her use of PTO days. Employees should be reminded that while it may seem inconvenient to keep track of their use of PTO, it can save headaches and uncertainty down the road. Employers should consider maintaining records to support their position. Good record-keeping practices can protect the company if a dispute arises over accrued PTO .
For Employers:
Employers should be clear with employees that they will not be paid for any accrued PTO days if they terminate employment prior to December 31st. Regarding the "Use-It-Or-Lose-It" rule, employers should instruct supervisors/managers to only deny PTO outside the designated blackout period if there are legitimate business reasons to do so. If employees are provided with accruals yet denied their use, it may be viewed as being against the spirit of the law. Employers should post their policies in conspicuous places and print their policies in employee handbooks. Regardless of what the company chooses to post or print, employers should consistently abide by their policies under Maine’s wage laws. Companies should be explicit that those policies are subject to change at any time and without notice.