Maryland's Department of Labor, Licensing & Regulation Revises Its Opinion About Vacation Pay In Light of Catapult Technology, Ltd. v. Wolf

As reported in this blog, I recently handled a case involving the issue of an employee's right to receive compensation for accrued but unused vacation pay. In Catapult Technology, Ltd. v. Wolf, a case of first impression, Maryland's Court of Special Appeals explicitly ruled that employees are entitled to receive compensation for accrued vacation pay at the conclusion of their employment, despite a provision in the employee handbook providing for forfeiture of the vacation pay.

Following the Court's ruling, I contacted Maryland's Department of Labor, Licensing & Regulation and advised them that the information on their web site concerning an employee's right to receive compensation for vacation pay was no longer a correct statement of law in view of the ruling in the Wolf case. At that time, the DLLR website contained the following statement concerning whether unused vacation is payable to the employee at termination:

"The answer to this question depends on the employer's policy, and whether this policy was communicated to the employee in advance. For example, if an employer informs employees at hiring that unused vacation leave will be lost or forfeited when employment ends, then an employee will probably not be able to claim it. On the other hand, where no policy exists or was made known in advance to a terminated employee regarding forfeiture of accrued vacation, the employee may receive the cash value of whatever unused earned leave was left -- provided it was otherwise usable."

After I contacted DLLR to advise them of the holding in Wolf, the Agency modified their view on this issue. Now, in conformity with Wolf, DLLR's position on this issue is as follows:

"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."

Triple Damages Under the Maryland Wage Payment and Collection Law

Over at the Maryland Employment Law Blog, I posted an article on when triple damages are available under the Maryland Wage Payment and Collection Law. The article includes a brief I wrote on the issue as well as a sample jury instructions.

Must an employer pay accrued compensatory time at my termination?

The answer is most likely, "Yes."

Workers are divided in two classes: (1) non-exempt employees who must be paid overtime; and (2) exempt employees who are entitled to overtime.

I wrote here that a private-sector employer generally cannot grant time off in lieu of of overtime to non-exempt employees. In other words, employers usually cannot give "compensatory time" instead of overtime wages to its hourly workers.

But, what about exempt employees? The law does not prohibit or require that an employer give compensatory time to exempt employees. Employer are free to do as they wish. Some employers reward their exempt employees by awarding compensatory time off if they work more than 40 hours in a week. In such case, the employee accrues "comp time" for work.

What happens to accrued comp time at the employee's termination? In my view, it must be paid. It is no different than accrued vacation. Catapult v. Wolf, discussed many times on this blog, established that accrued vacation is no different than earned wages and must be paid out at termination. All of this flows the Maryland Wage Payment and Collection Law's definition of wages, which includes "any . . . remuneration promised for service."

Top Five Ways Employers Violate Maryland's Wage Law

Over at the Maryland Employment Law Blog, I listed the top five ways employers violate Maryland's wage laws. Check it out.

True or False: My private-sector employer can offer me "comp time" in lieu of overtime?

False. It may seem silly but with a very limited exception: if you are entitled to overtime -- you are entitled to overtime. A private-sector employer generally cannot substitute "comp time" (or "compensatory time") in lieu of actual wages.

Note:

• A private sector employer may offer comp time to its exempt employees, such as its executive, administrative, and professional employees.
• Public-sector employees are governed by different rules, which do allow for comp time.

Court Affirms Ruling That Employees Are Entitled To Compensation For Accrued But Unused Vacation Pay

On August 20, 2007, in a much anticipated decision, Maryland's Court of Special Appeals affirmed a ruling issued by the Circuit Court for Montgomery County that employees are entitled to receive compensation for accrued vacation pay at the conclusion of their employment, despite a provision in the employee handbook providing for forfeiture of the vacation pay. In Catapult Technology, Ltd. v. Paul Wolf, et. al., the Court of Special Appeals held that earned and accrued vacation is properly considered a wage under Maryland's Wage Payment and Collection law and that departing employees are entitled to receive compensation for their accrued leave. In its ruling, the Court held that Catapult's policy calling for forfeiture of accrued vacation leave if employees fail to provide 2 weeks advance notice of their resignation, was contrary to the public policy in Maryland and void. On an unfortuate note, the Court reversed the jury's determination that the vacation pay at issue was withheld in bad faith and that the employees were entitled to enhanced damages. The employees may appeal this issue.

Following the Court's ruling, which was the first decision in Maryland dealing squarely with this issue, it is now clear that Maryland employees are entitled to compensation for their earned and accrued vacation even if the employer has a policy in place calling for the forfeiture of said leave. All of the 14 employees in the case were represented by Marc J. Smith of Smith, Lease & Goldstein, LLC. A copy of the opinion can be found here.

Can My Maryland Employer Withhold My Wages?

Maybe. In Maryland, an employee must agree in writing that his or her employer can withhold earned wages. Absent a written agreement, an employer has no right to withhold pay, even if the employee clearly owes the employer money or has failed to return company property, such as a laptop computer, at the conclusion of the employment relationship. If an employer does withhold pay without obtaining advance authorization from the employee, the employer potentially becomes liable to the employee for treble (triple) damages and attorney's fees under Maryland's Wage Payment and Collection law.