In Maine, an employer that has 11 or more employees must pay out all unused, accrued paid vacation when your employment ends, no matter what the company handbook says. This rule took effect on January 1, 2023 under an amendment to Maine's final-wage statute, 26 M.R.S. § 626. For covered employers, accrued vacation is treated as earned wages, so a "use-it-or-lose-it" forfeiture at separation is not enforceable. This makes Maine different from most states, where unpaid vacation hinges entirely on the employer's written policy.
Maine's specific rule: accrued vacation is wages at separation
Maine changed the landscape with legislation that amended the wage-payment law. The statute now provides that an employer that at any time prior to an employee's cessation of employment had 11 or more employees must pay all unused paid vacation accrued under the employer's vacation policy to the employee when employment ends. In plain terms, if you worked for a covered Maine employer and you have earned vacation hours sitting in your bank when you quit, are laid off, or are fired, those hours must be converted to cash and paid to you.
Because the rule lives inside Maine's final-wages statute, the same timing rules apply. Under 26 M.R.S. § 626, an employee who leaves employment must be paid in full for all wages due, including the accrued vacation, no later than the employee's next established payday. The employer cannot make you wait, and it cannot condition the payout on returning equipment, signing a release, or giving notice.
Who is covered, and who is not
The key threshold is the size of the employer:
- 11 or more employees: The payout mandate applies. Accrued, unused vacation must be paid at separation.
- Fewer than 11 employees: The state mandate does not apply. For these small employers, the older general rule still controls, meaning the employer's written policy or established practice determines whether you get paid for unused vacation.
The statute counts whether the employer had 11 or more employees "at any time" before the separation, so a business that shrank below 11 shortly before you left may still be covered. The headcount looks at the employer overall, not just your department or worksite.
Vacation versus general PTO
The law specifically names "paid vacation." Many Maine employers fold vacation, personal, and sick time into a single "paid time off" (PTO) bank. Where a combined PTO bank functions as vacation that you accrue and can use for any purpose, it is generally treated as vacation subject to the payout rule. Pure sick leave that is separate and only usable when you are ill is treated differently and is not automatically cashed out. Maine also has a separate earned paid leave law (under 26 M.R.S. § 637) that lets workers accrue paid leave usable for any reason, but that statute does not itself require a cash payout of unused earned paid leave at separation. If your time is labeled "vacation" or behaves like vacation, the § 626 payout rule is what matters most.
Are use-it-or-lose-it policies allowed in Maine?
This is where Maine draws a careful line:
- Forfeiting accrued vacation at separation is not allowed for employers with 11 or more employees. Whatever you have accrued and not used must be paid out when you leave. A handbook clause saying "unused vacation is forfeited on termination" cannot override the statute.
- Caps and accrual limits during employment may still be allowed. The law requires payout of vacation that is actually accrued under the employer's policy. An employer can still set how vacation is earned, including a reasonable maximum balance or an annual cap that stops further accrual once you hit the ceiling. What it cannot do is take away vacation you have already banked when you walk out the door.
So a Maine policy that says "you can carry no more than 80 hours into the next year" can be lawful, because it shapes how much you accrue. A policy that says "you lose your entire balance if you resign" is not lawful for a covered employer, because it strips you of wages you already earned.