Delaware’s neighbor to the south has amended its state wage law, clarifying that accrued but unused leave is payable upon termination only if provided by written policy, which was communicated to the employee at the time of hire.
This had been the long-standing position of the Maryland Division of Labor & Industry. But then came Catapult Technology, Ltd. v. Wolfe, a 2007 decision by the Maryland appellate court, which held that accrued but unpaid leave is a “wage” under the state’s wage and hour law. As a result of unreported decision, the Division of Labor changed its position and announced that employees could file a claim for unpaid vacation or sick time upon discharge or resignation. The new state law provides an important statutory defense to employers–but only employers that have written vacation-payout policy.
Delaware employers do not a similar statutory defense but it is well established that vacation payouts are not required unless the employer and employee had an arrangement to the contrary.
To avoid any potential dispute regarding what was or was not agreed to at the time of hire, employers should take the following steps:
- Determine exactly what your vacation policy will be. Will employees be able to roll time over from year to year? If so, is there any limit on the amount of time that can be accrued? And, finally, what happens to any accrued but unused time when the employee leaves the company? Payout can also depend on whether the employee was voluntarily or involuntarily discharged.
- Next, put your policy in writing and communicate it to all employees.
- Finally, do not make exceptions to the policy unless there truly are extenuating circumstances and, even then, document the reasons for breaking from the norm.