As we noted in our April 18, 2023 Alert here, Senate Bill 591 was passed during Maryland’s General Assembly on April 10, 2023. This Bill increased the amount that an employee must earn in order for a non-compete provision in an employment contract to be permissible under Maryland law. As expected, Maryland Governor Wes Moore signed Senate Bill 591 into law and it became effective on October 1, 2023.
The Salary Threshold Increase(s)
As of October 1, 2023, the salary threshold for non-competes increased to 150% of the state’s minimum wage – which is $19.88 per hour (the minimum wage of $13.25 per hour times 150%) or approximately $41,350 annually. This means that Maryland employers are prohibited from requiring employees to enter into non-compete agreements if they make $41,350 or less annually. This is a significant increase from the previous threshold of $15.00 per hour or approximately $31,200 annually. It is important to remember that this threshold will continue to rise automatically as the minimum wage increases, including this coming year.
Importantly, on January 1, 2024, when Maryland’s minimum wage automatically increases to $15.00 per hour, the ban on non-compete agreements will automatically expand to now include those making up to $22.50 per hour, or up to approximately $46,800 annually.
Takeaway
A non-compete or conflict of interest provision in an employment contract or similar document in violation of the new threshold shall be null and void, even if voluntarily entered into by the employee. Therefore, we encourage all Maryland employers to prepare for the increase in the state’s minimum wage and the resultant increase in the non-compete threshold beginning in 2024, and to seek legal counsel, if necessary, to ensure compliance.
More Information
The contents of this Alert are for informational purposes only and do not constitute legal advice. If you have any questions about this Alert, please contact the Shulman Rogers attorney with whom you regularly work or a member of the Shulman Rogers Employment and Labor Law Group.
