Maryland employers who wish to require their employees to sign a non-competition agreement beware. Effective October 1, 2019, non-competition agreements under Maryland law are valid only if the employee earns more than $15/hour or $31,200 annually. (See SB 328.) For employees who earn equal to or less than that, the agreement will be considered in violation of public policy and consequently, void.
The new Maryland law is not unique. In June, 2019, Maine enacted lawmaking non-competition agreements unenforceable for any employee earning less than 400% of the federal poverty line – nearly $50,000 in 2019. Similarly, in July, 2019, New Hampshire enacted the same restriction for employees that make equal or less than double the federal minimum wage ($14.50/hour).
The new Maryland law contains other significant provisions. First, the new law “does not apply to an employment contract or a similar document or agreement with respect to the taking or use of a client list or other proprietary client–related information.” Accordingly, non-solicitation agreements with employees to prevent them from taking the employer’s clients continue to be valid. Second, the law applies to both non-compete and conflict of interest contracts or provisions and is not limited to post-employment restrictions. Arguably, that provision means that, as written, an employer cannot restrict applicable employees from working for a competing company while employed (that is, moonlighting with a competitor).
As a result of this change in the law, Maryland employers should review current non-competition agreements with their employees to ensure that they are enforceable. If you have any questions or require assistance with this process, an experienced Reed Smith Labor and Employment attorney is available to assist.