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Is Your Non-Compete Agreement Enforceable in Maryland?

| March 19, 2021

non-compete agreement contract

In today’s highly competitive marketplace, more and more employers are turning to non-compete agreements to protect themselves. However, Maryland is one of the most restrictive states in the country when it comes to non-compete agreements. If you use non-compete agreements to protect your business interests, you need to know where the limits are before a conflict arises. Otherwise, you may expose critical vulnerabilities that could have been protected with careful planning. A Maryland employment lawyer can work with you to develop non-compete agreements that are fair, enforceable and provide your business with the protection you need. 

The Maryland Non-Compete and Conflict of Interest Clauses Act

The bulk of the law governing non-compete agreements in the state of Maryland is derived from a series of complex court decisions. However, as an initial matter, you should be aware of one law that provides some straightforward guidance for employers. Finalized in May 2019 and effective the following October, the Maryland Non-Compete and Conflict of Interest Clauses Act prohibits using non-compete clauses for employees who earn $15 per hour or less or $31,200 annually. Here are a couple of other important notes about the law:

  1. For covered employees, employers may not restrict their ability to work a second job or “moonlight” in the same industry. 
  2. The law does not restrict employers and employees from entering into agreements prohibiting the taking of client lists or other proprietary information. 

Any non-compete clause in violation of this law will be considered null and void, even if voluntarily entered into by the employee. 

When Can You Include a Non-Compete Clause?

In Maryland, the courts have adopted a two-part threshold test to determine whether non-compete clauses are appropriate: 

  1. The business has employees that provide unique services; and 
  2. The business has an interest in preventing the misuse of trade secrets, client lists, or the solicitation of customers.

If the business meets both of those criteria, the court will look to whether your non-compete clause is reasonable. Obviously, people can disagree over what may be considered reasonable, especially when a former employee is trying to pursue a lucrative opportunity with one of your competitors. An experienced Maryland employment lawyer can work with you to draft reasonable non-compete clauses that will be deemed enforceable in the event of a challenge. 

Reasonable Restrictions as to Duration and Geography

Most non-compete clauses have two principal restrictions: 

  1. They restrict the period of time after ending their employment that they may work for a competitor; and 
  2. They restrict the geographic area where you may go to work for a competitor. 

Again, the law on whether non-compete clauses are enforceable is complex, and the outcome often depends on the case’s unique facts before the court. That said, the courts will generally consider a non-compete clause reasonable of up to two years. They will also consider a geographic restriction as reasonable if it matches the employer’s business territory. That said, there are exceptions. A Maryland employment lawyer can help prevent challenges and defend you if your non-compete clause is challenged. 

Other Factors to Consider

When entering into a contract with an employee, here are some additional factors to consider when deciding whether a non-compete agreement would be appropriate: 

  • Would the non-compete clause create an undue hardship for the employee?
  • How unique are the employee’s skills?
  • Can the clause be limited in scope to protect only what is necessary?
  • Is the clause necessary to protect your trade secrets, intellectual property, or other proprietary information?

The undue hardship factor is important. If a court finds that the non-compete clause imposes an undue hardship, it will find the clause unreasonable and therefore unenforceable. Examples of undue hardships are a forfeiture of pensions or other vested benefits or forcing the employee to work in a different industry for significantly less money. 

Work with a Maryland Employment Lawyer 

The law surrounding non-compete agreements is extraordinarily complex. Unfortunately, many employers rely on one-size-fits-all form employment contracts that may not provide the protection they need, or even worse, may be deemed unenforceable in the State of Maryland. Maryland employment lawyer J.W. Stafford works with businesses of all sizes to help them develop employment contracts that meet their unique needs and goals. Whether you need a non-compete agreement or a confidentiality agreement, he has the knowledge, skill, and experience you need. Contact us today at (410) 514-6099 to schedule a consultation to discuss your needs and how we can help.