The Maryland General Assembly passed a new law, effective October 1, 2019, which outlaws non-competition agreements for employees earning no more than $15 per hour, or $31,200 per year. The new law declares that the public policy of the State forbids enforcement of a contract that restricts an employee from taking a new job or becoming self-employed in a similar business or field.
The law does not preclude an employer from restricting an employee from taking a client list or other proprietary documents. Truly confidential documents and trade secrets are still subject to protection.
Non-compete provisions are found in many occupations. They are enforceable where the employer has a legitimate business interest in preventing an employee from leaving and using the relationships formed to unfairly compete. Such enforceable contracts often involve sales personnel, who are the face of the company, and whose personalities and follow-through are valued by customers. When they leave a company, the customers may follow in droves.
But non-compete agreements have been misused by employers. A well-known example was that of Jimmy John’s sandwich shops requiring its low-paid workers to agree that for two years after leaving, they could not take jobs with competing companies that made more than ten percent of their revenue from sandwiches. New York sued the company, which then changed its practices.
Maryland’s law would apply to lower income workers, too, who are unlikely to be so valuable to the company that they could shift the loyalty of the customers. Such key employees will have to be paid more.
Interestingly, the law is not limited to employees who leave their current job. It also protects lower paid workers who seek a second opportunity, or even to start their own competing business, while employed.
The text of the new law is found at this link.