Joining the wave of jurisdictions limiting the competitive restraints employers may place on low-wage employees is Maryland. Maryland’s Noncompete and Conflict of Interest Clauses Act (the “Act”)―which passed without Governor Larry Hogan’s signature on May 28, 2019―will take effect on October 1, 2019. Recognizing that certain non-compete and conflict-of-interest clauses violate Maryland’s public policy and are therefore null and void, the Act prohibits employers from mandating that certain employees not join another employer or become self-employed in a same or similar business area. The covered employees are those who earn equal to or less than $15 per hour or $31,200 annually. This prohibition applies even if the parties entered into the employment agreement outside of Maryland and is not restricted to only post-employment actions. That is, a qualified employee may work for a competitor even during the term of employment.
The Act raises one explicit exception: there is a carve-out for agreements related to the taking or use of a client list or other proprietary client-related information. Notably, the Act does not mention whether an employer faces penalties for violating the Act. In addition, the Act provides neither a private right of action nor other enforcement means. As the Court of Appeals of Maryland has recognized, “A private cause of action in favor of a particular plaintiff or class of plaintiffs does not exist simply because a claim is framed that a statute was violated and a plaintiff or class of plaintiffs was harmed by it. Rather, the issue is a matter of statutory construction . . . .” Fangman v. Genuine Title, LLC, 447 Md. 681, 693 (2016) (quoting Baker v. Montgomery Cnty., 427 Md. 691, 708‒09 (2012)). Given the language of the Act, a court will likely need to address the legislative intent to assess whether the Act includes an implied right of action. As it stands, the Act provides a shield for a qualified employee should an employer seek to enforce a non-compete agreement.
Nearby, the Commonwealth of Virginia considered but ultimately declined to pass a similar bill in the latest legislative session. Needless to say, interest across the board is growing and may soon culminate at the federal level. Earlier this year, Senator Marco Rubio proposed the Federal Freedom to Compete Act, which effectively would prohibit non-compete agreements targeted at any employee except exempt executive, administrative, professional, or certain sales employees under the Fair Labor Standards Act.
For a recap of the non-compete landscape throughout the country, Seyfarth Shaw recently presented its fourth installment of its 2019 Trade Secrets Webinar Series. This installment describes what additional jurisdictions have prohibited enforcing non-compete clauses against certain employees. Additionally, we have addressed changes to similar laws in Maine, New Hampshire, and Washington.
We will continue to closely monitor developments related to the Act and any proposed non-compete legislation across the country.