One of the most common questions employers ask me is – What do I owe my employees in their final paycheck? Employees must be paid for all hours worked, including any overtime pay and earned commissions. But what about accrued vacation or other paid time off (PTO)? Maryland law states that a company’s written policy communicated to employees at the outset of their employment governs whether vacation or other PTO must be paid to the employee at termination. Having a carefully crafted handbook policy is important if a company wants to withhold accrued PTO from an employee who was justifiably terminated, e.g., engaged in harassing conduct of a subordinate employee. Importantly, Maryland law provides that when a company’s policy is silent or nonexistent, it defaults to the rule that the company owes the money for the accrued vacation or PTO.
Now is a great time to check your Employee Handbooks to know what your company policy says and to consider whether you should change it based on your company’s philosophy or a recent situation that left you paying out for more than expected.