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Forfeiture of Accrued Vacation or Similar Leave on

Termination of Employment May No Longer be Permitted in Maryland

In a recent decision, Maryland’s intermediate appellate court determined that accrued but unused vacation or similar leave constitutes a “wage” as defined in the Maryland Wage Payment and Collection Law (“Wage Payment Law”), and therefore cannot be withheld or forfeited on termination of employment even if an employer has a written policy that it will be. Catapult Technology v. Wolfe.

In that case, the employee handbook provided that employees accrued “universal leave” each pay period, to be used for vacation, illness and other paid time off from work The handbook also stated that if an employee resigned without providing two weeks written notice, the employee would forfeit any accrued universal leave. The plaintiffs had resigned without providing the required notice, and the employer refused to pay them for their unused accrued universal leave.

The Court of Special Appeals ruled that payment was required by the Wage Payment Law. The Court determined that the employees “‘earned’ their unused accrued leave in exchange for their work.” Accordingly, the Court concluded, the employer’s forfeiture policy contravened the purposes of the Wage Payment Law by depriving the employees of remuneration promised for their efforts.

The Catapult Technology v. Wolfe decision was “unreported,” which means it is not binding on a lower court nor may a lower court even consider that decision if faced with the same or a similar issue. In fact, prior to the Catapult Technology decision, the Maryland Division of Labor and Industry, which enforces the Wage Payment Law, had issued a guidance indicating that payment of unused vacation depended on the employer’s policy communicated to employees. The guidance stated that forfeiture of unused accrued vacation would be permitted if an employer had communicated to its employees in advance that unused leave will be lost or forfeited when employment ends. However, following the Catapult Technology decision, the Division revised its guidance 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.

As a result of the Catapult Technology decision and the new guidance issued by the Division of Labor and Industry, Maryland employers should consider whether their leave policies restrict or eliminate the payment of accrued and unused vacation, personal, or similar leave under any circumstances (not merely for failure to provide notice of resignation). Any such policies should be carefully reviewed to determine whether modification may be appropriate.

FMLA Amended To Provide Additional Leave

To Employees Who Have Family Members In The Military

President Bush has signed into law the Support for Injured Servicemembers Act (“SISA”). SISA amends the Family and Medical Leave Act (“FMLA”) to allow employees who have family members in the military to take leave as follows:

1. Qualifying Exigency Leave. The 12 workweeks of leave to which an employee is entitled under the FMLA are now also available if the employee has a “qualifying exigency” arising out of the fact that the employee’s spouse, child or parent is on active duty (or has been notified of an impending call or order to active duty), in the Armed Forces. SISA does specify what constitutes a “qualifying exigency;” this is to be set forth in regulations to be adopted by the Department of Labor (“DOL”).

2. Servicemember Family Leave. An employee who is the spouse, child, parent, or nearest blood relative of a “covered servicemember” may take up to 26 workweeks of leave during a single 12-month period to care for the servicemember. A “covered servicemember” is a member of the Armed Forces (including the National Guard or Reserves) who is “undergoing medical treatment, recuperation, or therapy, is otherwise in outpatient status, or is otherwise on the temporary disability retired list, for a serious injury or illness.” A “serious injury or illness” is one incurred on active duty and which may make the servicemember “medically unfit to perform the duties of the member’s office, grade, rank or rating.” During the single 12-month period in which an employee takes servicemember family leave, the combined total of all categories of FMLA leave that the employee may take is limited to 26 workweeks.

While what is a “qualifying exigency” and other aspects of the new law remain to be clarified by DOL, employers who are subject to the FMLA – those with 50 or more employees – should notify employees of this change to the law and should be prepared to grant these leaves to eligible employees when requested.

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