Action Item & FAQ: New Maine Paid Leave Rules Address Business Concerns

On January 1, 2021, LD 369, An Act Authorizing Earned Employee Leave takes effect for Maine employers. Passed by the Legislature in 2019, Maine employers have been patiently waiting for clarification as to the responsibilities accompanying 26 MRSA § 637. The statute itself provides that “An employer that employs more than 10 employees in the usual and regular course of business for more than 120 days in any calendar year shall permit each employee to earn paid leave based on the employee’s base pay as provided in this section.” The statute goes on to note that “[a]n employee is entitled to earn one hour of paid leave from a single employer for every 40 hours worked, up to 40 hours in one year of employment.”

To help employers understand their obligations under the statute, we have used the regulations, the recently published FAQs and the statute to answer the following frequently asked questions:

Who is entitled to leave?

Employees (full time, part time, temporary, and per diem) who work for an employer with more than 10 employees in Maine who are not covered under a collective bargaining agreement as of 1/1/2021, are eligible for this benefit. Seasonal employees should see below for possible exemptions.

How much leave are employees entitled to?

Employees (full time, part time, temporary, and per diem) are entitled to earn one hour of Earned Paid Leave from a single employer for every 40 hours worked, up to 40 hours in one year of employment. Salaried exempt employees are presumed to have worked 40 hours per week and would accordingly obtain one hour of Earned Paid Leave per week.

My business is Maine-based and I have less than 10 employees in Maine, but more than 10 across the country. Are those employees entitled to Earned Paid Leave?

If you pay unemployment for an employee in a state other than Maine, those individuals would not be covered by Maine’s Earned Paid Leave Law.

Are Independent Contractors entitled to Earned Paid Leave?

No. Employers, however, need to continue to be vigilant and make sure they are appropriately classifying individuals as independent contractors, as opposed to employees.

When does an employee begin to earn Earned Paid Leave?

Employees begin to earn the leave immediately upon hire, but employees may restrict the use of leave if the employee has not been employed for at least 120 days. Note the employee does not need to work 120 days, simply be employed for that period of time.

Are seasonal employees entitled to Earned Paid Leave?

If the employer is within a seasonal industry and has submitted the required report to the Bureau of Unemployment Compensation that sets forth the seasonal period for the applicable year, then an employee who works only within that seasonal period is exempt and would not earn any Earned Paid Leave.

At what rate of pay is Earned Paid Leave paid out at?

At the Employee’s Base Rate of Pay, which is determined by reviewing the week immediately prior to the leave taken. Employers should divide the total of all earnings, including bonuses and commissions, by the number of hours worked. Accordingly, should an employee receive a bonus or other commissions in the week prior to the leave being taken, such amounts will be included in determining the Base Rate of Pay. Employers in the service industry, whose employees use the tip credit, however, will use the minimum wage as the Base Rate of Pay.

Can employers provide all 40 hours of Earned Paid Leave to employees at the start of the year, instead of having them accrue time?

Yes, the time can be front loaded at the beginning of a calendar year or on an employee’s anniversary date as long as the employee receives no less Earned Paid Leave then they would have if an accrual method were used. If an employer does front load and an employee terminates their employment prior to working sufficient hours to “earn” the Earned Paid Leave time taken, the employer may deduct the unearned leave from the last paycheck, but employers should make employees aware of this policy.

Can employees roll-over Earned Paid Leave from year to year?

Yes, but the employer can cap the number of hours of accrued Earned Paid Leave at 40.

Can I cap the amount of Earned Paid Leave an employee accrues?

Yes. Earned Paid Leave can be capped at 40 hours.

Is unused Earned Paid Leave paid out at the time of the employee’s termination?

If the employer has a policy on unpaid vacation time, the same policy for vacation time will apply to any balance of Earned Paid Leave. If the employer does not pay out the unused Earned Time Off at the termination of employment, and the employee returns to work for the same employer within one year, the employee will be entitled to the amount of Earned Paid Leave they had at the time of termination.

Does the employee need to explain why they are using leave?

No, but the employee must comply with the employer’s reasonable notice requirements. Such notice requirements cannot exceed 4 weeks’ notice.

If an employee uses Earned Paid Leave for an emergency, illness or other sudden necessity, can the employer request proof of the need for leave?

Unless the need for leave is for more than 3 consecutive days, the employer cannot require a medical note or other documentation, but may request a general description such as “child is ill” or “transportation issues.”

Can an employer require that employees use Earned Paid Leave in full or half day increments?

No. Employers must permit employees to take leave in one-hour increments or less.

Can an employee be disciplined for taking Earned Paid Leave?

No, but if an employee exceeds the amount of leave that is available or does not otherwise comply with the employer’s notice requirement, then discipline can occur.

Are there posting requirements?

Yes, you can update your Maine Regulation of Employment Poster with Earned Paid Leave information here.

What is key to note is that the regulations are silent as to the effect this law has on employers who are currently offering employees a form of paid leave. The FAQs issued by the DOL, however, does specify that the provision of sick leave and vacation days may meet the Earned Paid Leave law standard, specifically it notes:

Question: My business currently provides sick and vacation days. If those total 5 days or more, am I in compliance with the law?

Answer: The business must provide 40 hours of Earned Paid Leave. That leave must have the following characteristics:

• The leave may be taken for any reason. (For example, leave that may only be taken when the employee or a family member is ill does not count toward the 40 hours required).
• If an employer allows vacation time, with notice of up to four weeks, that leave will count toward the required leave, as long as the leave also has the following characteristics:
  • The employee may take the leave, with only the amount of notice feasible under the circumstances, in the event of an emergency, illness, or sudden necessity. (For example, if the employee is allowed to take the leave when a daycare provider is ill, and the employee notifies the employer when the employee first learns of the babysitter’s unavailability, such leave will count toward the 40 hours required).
  • Leave will count toward the 40 hours required even when the employer places restrictions on scheduling leave to prevent undue hardship to the business (for example, a retailer not allowing vacation time to be taken on Black Friday).
• If the employer provides more than 40 hours of leave to full-time employees, it only needs to meet the characteristics of the Earned Paid Leave for 40 hours of leave. For example, the employer may allow 40 hours of leave for any reason but allow additional time that may only be used with advance notice (i.e. vacation time).

Maine employers should review their current paid leave practices as soon as possible to make sure that they provide adequate time to update their policies to incorporate Earned Paid Leave into their handbooks prior to January 1, 2021. Employers should pay particular close attention to their current policies requiring return-to-work notes for illnesses/absences. Additionally, employers should download and post a copy of the state’s Earned Paid Leave poster, available here.

For any questions concerning Maine’s Earned Paid Leave statute, reach out to Tawny Alvarez or another member of Verrill’s Labor and Employment Practice Group.