Maryland Restricts Non-Compete Clauses for Low-Wage Employees

If you have ever started a new job, you may have noticed a document in the mountain of paperwork you were asked to sign called a “non-compete agreement” or something similar. While non-compete agreements in some cases can be held enforceable against former employees, the Maryland General Assembly recently exempted a sizable portion of Maryland employees from their terms. Read on to find out if the new law applies to you.

What Are Non-Compete Agreements?

Non-compete agreements are restrictive covenants that prevent an employee, once he or she is no longer employed by the employer, from engaging in similar business activities elsewhere or otherwise competing with his or her former employer. As restraints on trade, these types of agreements are disfavored by courts. Nonetheless, Maryland courts are willing to enforce non-compete agreements against former employees “if the restraint is confined within limits which are no wider as to area and duration than are reasonably necessary for the protection of the employer and do not impose undue hardship on the employee or disregard the interests of the public.” In other words, the restrictions must be reasonable in time and scope, which the court evaluates on a case-by-case basis.

The Purpose of Non-Compete Agreements

Non-compete agreements are designed to protect an employer’s investment in its employees. They are intended to prevent situations in which an employer expends substantial time and resources training a new employee only to have the employee quit and take his or her new skills to a competitor. The danger of this type of exploitation, however, varies by industry depending upon the professional skills required and the competitiveness of the field. Generally, the more skilled or specialized the profession, the more reasonable a non-compete agreement becomes. Thus, a non-compete agreement that prevents an insurance agent from working for a competitor within 50 miles of his or her previous employer for one year would be more reasonable than one that prevents a barista from working within 500 miles of his or her former employer for five years.

What the New Law Does

In recognition of the reasonableness principle, the Noncompete and Conflict of Interest Clauses Act declares non-compete agreements null and void for employees who earn less than or equal to $15 per hour or $31,200 per year. An employer, however, can still restrict, by contract or other agreement, the ability of an employee to take or use a client list or other proprietary client-related information. The law assumes that the enforcement of non-compete agreements against low wage earners — such as those engaged in food service, hospitality, retail, etc. — harms the employee more than it helps the employer, as employers in those fields are at a low risk of exploitation by former employees. It does not apply to higher-paid employees who typically work in positions in which a non-compete agreement would better serve the interests of the employer.

Contact a Maryland Employment Lawyer for More Information

If you recently signed a non-compete agreement and you earn less than or equal to $15 per hour or $31,200 per year, it may no longer be valid. For more information about non-compete agreements in Maryland, please contact a Maryland employment lawyer at the Law Firm of J.W. Stafford for a consultation by calling 410-514-6099.

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