How to Payout Paid Time Off

How to Payout Paid Time Off

A couple of employment law matters have recently crept their way into my inbox. One of them has to do with the payout of accrued but not used time off

Often when employees are let go, there is a question if the employer is obligated by law to pay out paid time off that has been accrued by the employee but not yet used. The question becomes one of policy. In the state of Maryland where we practice, the default position is no – the employer does not have to pay out accrued but unused time off

Many people will criticize this policy as wage theft or stealing from the employee, but that is not the case. Paid time off is a benefit that is offered to employees. There are a few circumstances where paid time off is required. For example in Maryland if a business has fifteen or more employees, you are required to provide paid time off for sick leave purposes (as indicated in the Maryland Sick Leave law). But the law does not require the employer to pay out the unused paid sick time. Other than that, there is no actual statutory requirement to provide vacation time. 

So, the default position is that it is not legally required for employers to pay out paid time off.  However, if you have a policy whether written or unwritten of paying out paid time off when an employee is terminated or resigns, that policy will control. Often this policy will be written into an employee manual and you are required to uphold it. Obviously, an employer can change a policy any time they want, but they cannot discriminate if the policy is in place. If you have any class of employees, you cannot discriminate in the policy. It msut be applied equally to everyone. 

I counsel clients to remember that an employee manual, while not strictly a contract, an employee manual can create semi-contractual rights. Paying out paid time off is a matter of employer policy. This policy will create a semi-contractual right and certainly an expectations among employees. If you have a policy that pays out paid time off, you must adhere to that policy. Otherwise, you should check out your state and local laws to see if you’ll be required to pay out paid time off. 

Have any employment law questions? We’d be happy to help. Contact us today