Maryland Changes to Non-Compete Law

Maryland Changes to Non-Compete Law

Effective October 1, 2023, Maryland will expand the number of individuals who cannot be subject to a non-compete agreement with their employer. Large employers, defined as companies employing 15 or more employees, may not impose a non-compete agreement on any employee earning less than $19.88 per hour or $41,350 per year.

Because the law has tied the minimum earning threshold to the state’s minimum wage, when the minimum wage increases, so too does the minimum salary for non-compete agreements. The law says that anyone earning less than 150 percent of the minimum wage may be subject to a non-compete agreement. So beginning January 1, 2024, when the Maryland minimum wage increases to $15.00 per hour, the minimum earnings for someone to be subject to a non-compete will be $22.50 per hour or $46,800.

It is important to note that this law applies only to non-compete agreements or those that restrict an employee from going to work with another company after employment. The law does not restrict any kind of non-solicitation agreement that applies to customers or other employees.

For companies that have non-compete agreements for their employees making less than the threshold minimums, you will be required to rescind the non-compete in writing to the employee. Alternatively, you can give the employee a pay raise to meet the minimum. The law is silent on whether a former employee who is still bound by a non-compete agreement and who made less than the threshold has to be told the non-compete is no longer applicable.

If you have employees who are subject to non-compete agreements, this is a good time to start reviewing those employees’ pay packages. Give us a call or schedule a consultation with us to talk more about this law and how it may affect your company.