Morgan Lewis

Maryland joins the list of states to enact an hourly minimum wage requirement of $15.00 with the conclusion of its 2019 legislative session. The state also enacted a law prohibiting the use of noncompetition agreements for low wage employees.

The 2019 Maryland legislative session officially concluded on May 28—the final date for Governor Larry Hogan to veto any bills passed by the Maryland General Assembly. During this session, the General Assembly enacted several significant employment bills, including those that (1) gradually increase the state hourly minimum wage to $15.00 by 2025; and (2) restrict the use of noncompetition agreements for “low wage employees.”

Minimum Wage Increase

Earlier this legislative session, the General Assembly overrode Governor Hogan’s veto to enact the Payment of Wages – Minimum Wage (Fight for Fifteen) Act (the Minimum Wage Act). The Minimum Wage Act gradually raises Maryland’s hourly minimum wage—currently $10.10—to $15.00 by January 1, 2025, for employers with more than 14 employees, according to the following schedule:

  • January 1, 2020: $11.00
  • January 1, 2021: $11.75
  • January 1, 2022: $12.50
  • January 1, 2023: $13.25
  • January 1, 2024: $14.00
  • January 1, 2025: $15.00

The Minimum Wage Act contains a slightly slower rate for hourly minimum wage increases for “small employers”—defined as employers with 14 or fewer employees—as those employers receive an additional 18 months to meet the $15.00 hourly minimum wage requirement. The hourly minimum wage requirements for small employers under the Minimum Wage Act are as follows:

  • January 1, 2020: $11.00
  • January 1, 2021: $11.60
  • January 1, 2022: $12.20
  • January 1, 2023: $12.80
  • January 1, 2024: $13.40
  • January 1, 2025: $14.00
  • January 1, 2026: $14.60
  • July 1, 2026: $15.00

The Minimum Wage Act does not affect the hourly minimum wage requirement for tipped employees, defined as employees who customarily and regularly receive more than $30.00 each month in tips, which remains at $3.63.

With the passing of the Minimum Wage Act, Maryland is one of seven states to enact a $15.00 hourly minimum wage—along with California, Connecticut, Illinois, Massachusetts, New Jersey, and New York. Maryland also joins the District of Columbia, its neighboring jurisdiction, whose hourly minimum wage is scheduled to reach $15.00 for nontipped employees on July 1, 2020.

Noncompetition Agreements for Low Wage Employees Prohibited

On May 28, Governor Hogan permitted the Noncompete and Conflict of Interest Clauses Act (the Noncompete Act)—which the General Assembly passed earlier in the legislative session—to become law without his signature.

The Noncompete Act takes effect on October 1, 2019, and prohibits the use of a noncompete or conflict of interest provision that restricts a “low wage employee’s” ability to enter into employment with a new employer or become self-employed in the same or similar business or trade. The law defines a “low wage employee” as one who earns equal to or less than either $15.00 per hour or $31,200.00 annually. The Noncompete Act provides that the prohibited restrictive covenants are null and void as against public policy, and the prohibitions apply even if the employee and employer entered into the agreement in a different state. Critically, however, the Noncompete Act contains an explicit carve-out for agreements that restrict the taking or use of a client list or other proprietary client-related information.

As drafted, the Noncompete Act does not contain a private right of action or any other enforcement mechanism. Nor does it provide for any employer penalties stemming from a failure to comply with the requirements.

Recommendations for Employers

Maryland employers should prepare to take action to ensure they are in compliance with the Minimum Wage Act before the law takes effect on January 1, 2020. Employers should immediately review their employee rosters in order to identify the positions affected by the increased minimum wage, and confer with their payroll providers to ensure a smooth transition for any affected employees. In addition, employers should review their employee rosters and employment agreements to determine whether any employees covered by the Noncompete Act are subject to restrictive covenants prior to the act’s October 1, 2019, effective date. Finally, employers should consider drafting narrowly tailored noncompete agreements for select employees covered by the Noncompete Act in order to protect client lists and other proprietary client-related information.

 

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