Maryland Law and Non-Compete Agreements: Are They Still Enforceable?

By: Michael P. Sawicki, Esq.

Non-compete agreements are contracts between employers and employees that prevent employees from competing with their employers for a specific period of time after termination of employment. These agreements are meant to protect the employer’s business interests, trade secrets, and confidential information. The enforceability of such agreements is usually tied to a duration and reasonableness standard.

There has been a nationwide movement, however, regarding the enforceability of employment-related non-complete agreements and certain restrictive covenants.  New York is poised to become the fifth state in the nation to impose a complete ban on employment-related noncompete agreements, joining California, Oklahoma, North Dakota, and Minnesota.

Maryland recently enacted a revised partial restriction on employment-related non-compete agreements with the enactment of Senate Bill 591, effective October 1, 2023. Maryland has linked the enforceability of an employment-related non-compete with an employee’s earnings tied to the minimum wage, thereby protecting employees who fall below the mandated criteria from employer mandated non-competes. This public policy is designed to protect lower wage employees and allow unrestricted movement in the workforce, even if their employment competes with their prior employer.

Maryland employers are now prohibited from imposing a non-compete, conflict of interest, or similar agreements on employees earning 150% of the minimum wage. With the recent increase of the minimum wage rate to $15.00 per hour effective January 1, 2024, this translates to $22.50 per hour, or an estimated annual income of approximately $46,800. Importantly, the new threshold will automatically increase with any future increments in the minimum wage.  (Under the prior law, employers were prohibited from entering a non-compete agreement with employees who earn $15.00 per hour or less, or $31,200 annually.)

This newly revised Maryland law can have detrimental effects to employers seeking to protect their carefully earned business and client relationships. Until there is court interpretation of the new law, the application to salaried employees could be subject to interpretation and debate. The new law does not, however, apply to the enforceability of non-solicitation agreements protecting client lists and other proprietary client information. A business still has enforceable rights to protect its confidential information.

If you would like to get more information on the creation of a data security policy and speak to an attorney about your needs, please contact Batoff Associates, P.A. at 410-864-6211.