How Maryland Is Continuing The Trend Of Restricting Non-Compete Agreements

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Imagine you are a boss training a new worker on a difficult job. You spend weeks teaching your new hire the ins and outs of the industry, offering detailed technical advice on tricky situations and spending time and money on a rigorous training. Then, just as your training is wrapping up, your new employee quits and takes a job across town at your biggest competitor.

Seems unfair, right? That’s the situation that lawyers and lawmakers envisioned when designing non-compete agreements, contractual limits that bar workers from taking information and skills they learned on the job to a direct competitor in an unfair way.

Unfortunately, the solution that they designed is now being used in situations that are far from what was originally envisioned. Non-compete agreements were supposed to be a shield to protect employers from unfair situations, but they are now being used as a sword against workers to create unfair situations.

One notable instance, according to news reports, occurred with Jimmy John’s, the fast food sandwich chain. Jimmy John’s essentially prohibited any departing employees from working for another fast food restaurant within two miles for two years after quitting — a scenario that is far from the detailed technical work envisioned in the law. After much negative publicity and a legal investigation, Jimmy John’s officially stopped asking employees to sign these non-compete agreements.

Some states are now getting proactive and taking steps to curtail the abuse of non-compete agreements. One of the most recent states is Maryland.

Maryland’s New Law

On May 28, 2019, the Noncompete and Conflict of Interest Clauses Act (NCICA) became law. The crux of the new law is that non-compete agreements are automatically void when applied to an employee that earns equal to or less than $31,200 per year or $15 per hour. The NCICA is not intended to apply to higher paid positions, where the use of non-compete agreements are more likely to be used in ways they were originally intended.

This is because when employers use non-compete agreements with low-wage earners, such as those making fast food, the non-compete agreement does little to actually protect the employer from unfair exploitation of a former employee. However, it provides employers with the ability to take advantage of employees knowing they’ll be less likely to quit because they’re afraid getting sued should they decide to work for a nearby competitor.

The NCICA goes into effect on October 1 of this year, but does not have any language as to how violations of the law are to be enforced. Another notable feature about the NCICA is that it applies even if the contract was formed in another state. Finally, the law does not prohibit employment contracts that restrict “the taking or use of a client list or other proprietary client-related information.”

Other States’ Restrictions on Non-Compete Agreements

Maryland isn’t the only place where non-competes are heavily restricted. On June 28, 2019, Maine enacted the Act to Promote Keeping Workers in Maine, putting significant restrictions on employers using non-competes. On July 10, 2019, New Hampshire passed a similar legislation prohibiting non-competes for lower-wage workers who earn less than $24,280.

In Illinois, the Illinois Freedom to Work Act went into effect on January 1, 2017, which prohibits the use of non-compete agreements with low wage workers who earn up to either $13 per hour or minimum wage, whichever is greater.

Washington state’s law goes into effect on January 1, 2020, and is far more detailed than the Maryland law. Most notably, it voids non-compete agreements for employees who earn more than $100,000 per year. Oregon’s law allows non-compete agreements as well, but only for employees earning roughly $95,000.

Other states have made similar attempts to restrict non-compete agreements, including Virginia and New Jersey. However, they have not yet put anything into law. Congress has also attempted to restrict non-compete agreements as recently as 2018, with the Workforce Mobility Act of 2018. However, it’s still stuck in a Senate committee.

It’s clear from the various proposals, however, that lawmakers now recognize that the laws around non-compete agreements need to be reformed.

After clerking for a judge and working as a federal prosecutor, I wanted to spend more quality time with my kids so in 2009 I started the Spiggle Law Firm. We focus on

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