When employees leave your company, are they entitled to Accrued Vacation Pay?
It depends on two things. First and most important, it depends on whether the company has a written policy in the employee handbook or in a separate employment contract that governs the situation. Second, it depends on the governing law of the state in which the employer operates.
In Maryland, the law states that an employer’s policy ultimately governs the situation, assuming the policy was communicated to the employee at the time of hiring. If there is no written policy or if it was not properly communicated to the employee, the company owes the employee accrued vacation pay, the cash value of whatever unused vacation leave the employee has accrued.
Neighboring states, such as Virginia and Pennsylvania have no similar law.
What does your company’s employee handbook say on the subject? It is important to regularly review your employee handbook and company policies to ensure you will not be forced to provide accrued vacation pay to departing employees.
If you are still not sure whether you want a policy, here is one last piece of advice:
Consider the employee who is being terminated for poor performance, for misappropriation of funds, for lying on their job application, or for bullying and ask yourself whether that’s the person who should be ‘rewarded’ with payout of their vacation because your business did not have a written policy that addressed the issue.
If you have any questions about Departing Employees and Accrued Vacation Pay in Maryland or wish to have your employee handbook or other company policies reviewed, please contact one of our Labor and Employment attorneys.
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