Maryland employers are now prohibited from enforcing non-compete agreements against employees earning less than $15 per hour or less than $31,200 per year. SB 328 became effective October 1, 2019, making such noncompete agreements “null and void as being against the public policy of the state.” The bill passed 97-39 in Maryland’s House and unanimously in the Senate.
There is, however, a significant caveat to the noncompete prohibition. Under the law, employers may still restrict low-wage employees from using or taking “a client list or other proprietary client-related information.”
Maryland is the latest state to join a growing number of states that have enacted similar legislation. Other states that shield low-wage employees from non-compete agreements include Illinois, New Hampshire, Maine, and Oregon. Massachusetts prohibits employers from enforcing noncompete agreements for employees in certain groups, such as interns and employees who have been laid off or terminated without cause, as well as non-exempt employees under the Fair Labor Standards Act (FLSA). In 2016, New York’s then-Attorney General said, “noncompete agreements for low-wage workers are unconscionable. They limit mobility and opportunity for vulnerable workers and bully them into staying with the threat of being sued. Companies should stop using these agreements for minimum-wage employees.”
Effective January 1, 2020, noncompete agreements in Washington state will only be enforceable against employees who earn more than $100,000 per year and independent contractors who earn more than $250,000 per year. These threshold amounts will be revised each year to account for cost-of-living increases. Likewise, effective January 15, 2020, Rhode Island will prohibit noncompete agreements with certain employees, including low-wage workers. Other states are considering similar legislation.
Because laws regarding noncompetition vary by state, employers operating in multiple jurisdictions should ensure that their employment practices comply with state law and update their employment forms as needed. Employers that use one noncompete template for employees in locations across the country may be creating enforceability issues down the road. It is important that noncompete agreements and other restrictive covenants are tailored to the geographic location(s) in which they may be enforced. That means more routine checkups on the content of these critical forms. Ballard Spahr’s Labor and Employment Group is well-versed in advising employers about restrictive covenant matters.
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