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April 3, 2008

Senate Passes Bill to Clarify Wage Payment On Termination

The Maryland Senate unanimously passed (47-0) legislation to correct a recent change in Maryland law regarding the payment of unused leave time to employees upon termination.

The bill, SB 797, was introduced by Senators John Astle (D-Dist. 30) and Allan H. Kittleman (R-Dist. 9) at the Maryland Chamber’s request.

As a result of an unpublished Court of Special Appeals decision, and a change in the Department of Labor, Licensing and Regulation’s (DLLR) position, Maryland employers are now required to pay out all unused vacation leave to employees upon termination, regardless of what the employer’s written policy states about payment of leave to employees upon termination. This is a complete reversal of established Maryland law.

For years, it was DLLR’s policy that payment of unused leave upon termination depends on the employer’s policy and whether the policy has been communicated to employees in advance. In November 2007, DLLR revised it’s policy to state, “When an employee has earned or accrued his or her leave in exchange for work, an employee has a right to be compensated for unused leave upon the termination of his or her employment regardless of the employer’s policy or language in the employee handbook.”

SB 797 is corrective legislation that restores the law to its pre-November 2007 state. The bill clarifies that if an employer has a written policy regarding the payment of the accrued leave, and this policy is communicated to the employee prior to the termination of employment, the employer must pay accrued leave to an employee only if the employee is entitled to the leave under the terms of the written policy.

For more information, contact Allyson Black at ablack@mdchamber.org.

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