State of Maryland Finally Passes Partial Non-Compete Ban
A few months ago, the State of Maryland finally made it official:
Effective October 1, 2019 employers are barred from having their low-wage employees being bound by non-compete agreements. Naturally, this statutory change raises some questions, and, to give credit where credit is due, it answers others.
The New Maryland Law
First, here is what the statute, also known as Senate Bill 328 (which amends Section 3-716 of Maryland's Labor and Employment Law) actually says:
Labor and Employment - Noncompete and Conflict of Interest Clauses
FOR the purpose of providing that certain noncompete and conflict of interest provisions are null and void as being against the public policy of the State; providing for the application and construction of this Act; and generally relating to noncompete and conflict of interest clauses in employment.
(a) (1) This section applies:
(i) To an employment contract or a similar document or agreement concerning an employee who earns equal to or less than: :1. $15 per hour; or 2. $31,200 annually; and
(ii) Whether or not the employer and employee entered into the employment contract or similar document or agreement in the State.
(2) This section 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.
(b) A noncompete or conflict of interest provision in an employment contract or a similar document or agreement 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.
Section 2. And be it further enacted, that this act may not be construed to affect a determination by a court in an action involving a noncompete or conflict of interest provision that is not subject to Section 1 of this Act.
Section 3. And be it further enacted, that this act shall take effect October 1, 2019.
There are two important pieces to keep in mind with this new legislation:
1) That Maryland was careful to retain a carve-out that still protects the proprietary client information of an employer; and,
2) That it remains unclear how this law will be applied to pre-existing non-compete agreements - will those agreements be exempt from this law, a/k/a "grandfathered," or will they be deemed invalid retroactively?
It certainly wouldn't be surprising - at least to me - if the answer to this question isn't ulimately determined by Maryland's courts.
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