There has been a recent trend of states moving to limit the application of restrictive covenants. Both Virginia and Maryland have recently sought to limit the enforceability of such agreements on low-wage employees. While Virginia failed to pass such legislation, Maryland enacted legislation that limits the enforceability of non-compete agreements on low-wage employees.

On May 25, 2019, Maryland enacted SB 328, which prohibits employers from entering into non-competition agreements with employees who earn equal to or less than $15 an hour or $31,200 annually. Under this new law, for employees earning wages at or below this threshold, a non-compete or conflict of interest provision that “restricts the ability of an employee to enter into employment with a new employer or to become self-employed in the same or similar business or trade shall be null and void as being against the public policy of the State.”

It should be noted that the law is applicable to all employees working in Maryland earning less than $15 per hour or $31,200.00 annually regardless of whether the agreement was entered into in Maryland or has different choice of law or venue provisions.

Further, to eliminate confusion and protect employers, the law specifically states that it “does not apply to an employment contract . . . with respect to the taking or sue of a client list or other proprietary client-related information.”

Need help with employment documentation or practices? Contact us.

Practical Counsel:  Maryland Employers should:

• Revise Restrictive Covenant agreements applicable to employees earning less than $15 per hour or $31,200.00 annually. 
• This does not mean employers cannot (or should not) have restrictive covenants for these low-income employees – it simply means that the agreement should not include non-competition provisions.   
• Depending upon the nature of the employer’s business, at a minimum, the employer should still consider the following provisions: (a) Confidentiality; (b) Intellectual Property / Invention; and (c) Non-Solicitation of Client and Employees.

As a final note, Restrictive Covenants are an important tool that all employers should consider.  And, although they may not be appropriate for all employees, when carefully and narrowly tailored to protect the legitimate business interests of the employer, they serve an important role in protecting business.

For help ensuring your business is compliant with applicable laws regarding restrictive covenants, contact the employment law experts at General Counsel, P.C. today at 703-556-0411.