MARYLAND ENACTS LEAVE PAYOUT LAW
Today, in a rare victory for employers, the Governor signed
legislation
enabling Maryland employers, by written policy, to control
by policy whether and when the value of accrued, unused
leave will be paid to a departing employee at termination
of employment. This legislation overturns the unpublished
decision in Catapult Technology LTD v. Wolfe, in
which the Maryland Court of Special Appeals rejected this
previously well established rule.
As we previously reported to you, in Catapult Technology
LTD v. Wolfe, the plaintiffs resigned from their jobs
without providing two weeks notice. They were denied pay
for their accrued, unused leave because, under company policy,
employees who resigned without notice forfeited their accrued
leave. The employees sued the company, claiming the policy
violated Maryland’s Wage Payment and Collection Act
because fringe benefits (such as leave) are wages and, by
law, all wages must be paid at termination. The Court of
Special Appeals held that because employees’ accrued
leave was based on the number of hours they worked, the
leave was “promised for service.” Once accrued,
the leave constituted wages that could not be withheld at
termination. In addition, because Maryland’s wage
law does not permit its provisions to be waived by private
agreements, company policy could not be used to invalidate
the entitlement to the wages.
Although Catapult Technology was an unreported decision,
it posed a concern to employers because it was the only
decision by a Maryland appellate court on this particular
issue, and would likely be cited by employees seeking payout
of accrued, unused leave. In addition, following the decision
in this case, the state Department of Licensing and Labor
Regulation, which has enforcement authority regarding state
wage payment laws, changed its website to reflect the Catapult
Technology rule.
The new law, which was initiated by the Maryland Chamber
of Commerce’s Employment Issues Committee (co-chaired
by one of our attorneys, Fiona Ong), returns to the prior
rule in Maryland, with an important change to the notice
requirements: At the time of hiring, in addition to the
rate of pay and the regular payday, the employer must now
give notice of leave benefits. Most employers would typically,
without any law, provide notice to a new employee of his
rate of pay and payday, but not necessarily provide information
at the time of hire regarding leave benefits. The new law
now requires that type of information. The law also specifies
that, if the employer has a written policy limiting the
payment of accrued leave and has given notice of this policy
in compliance with the new notice requirement, the employee
will not be entitled to payment for accrued leave upon termination.
Because there is a gap in time between the Catapult decision
and the enactment of this law, which takes effect immediately,
the law further provides that during this period, if the
employer had a written policy limiting payout of accrued
leave which was communicated to the employee, the written
policy will govern whether a payout is required.
In light of this new law, employers may now control whether
and under what conditions employees may receive pay for
the value of accrued, unused vacation so long as this is
communicated to employees by a written policy.
Shawe
Rosenthal, LLP provides this publication for informational
purposes, and it should not be construed or relied upon
as legal advice. You should contact your Shawe Rosenthal,
LLP lawyer to discuss any questions that you may have concerning
your own situation.
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