Key Changes & Updates to Employment Agreements: What Maryland and Virginia Employers Need to Know

Employers in Maryland and Virginia should be aware of new laws that affect non-compete, confidentiality, non-disclosure, and non-disparagement provisions in pre-dispute agreements that are provided to employees at the onset of, or during, their employment. In Virginia, employers are now prohibited from requiring employees to enter into non-disclosure, confidentiality, and/or non-disparagement agreements that relate to claims of sexual harassment. Virginia’s House Bill 1895 amends an existing Virginia law that already covers sexual assault. Separately, in Maryland, employers may not impose non-compete agreements upon employees that earn less than $41,350 in 2023 or $46,800 in 2024.

Employers in both states should review and revise their agreements with employees to account for these new laws.

Non-Disclosure, Confidentiality, and Non-Disparagement Agreements in Virginia Must Carve Out Sexual Assault and Sexual Harassment Claims

Effective July 1, 2023, Virginia employers are prohibited from requiring employees to enter into confidentiality, non-disclosure, or non-disparagement agreements that relate to claims of sexual harassment in addition to claims of sexual assault, the inclusion of which is already unlawful. Virginia is following the lead of other states that have similar laws, including New Jersey, New York, Washington, and California, as well as provisions under the recent federal Speak Out Act.  The Speak Out Act prohibits the use of non-disclosure and non-disparagement agreements related to allegations of sexual assault and/or sexual harassment that are entered into “before the dispute arises.  Employers should note that the law only applies to prospective and current employees, and it does not apply to, for example, independent contractors or other non-employment relationships.

The law applies to agreements that are entered into as a “condition of employment,” so it will likely be interpreted as applying to non-disclosure, confidentiality, or non-disparagement agreements that employees enter into at the beginning of their employment and not to a severance or other post-employment agreement. It is unclear, however, whether it will apply to settlement agreements executed during an employee’s employment, if the settlement agreement is a condition of continued employment.

The law does not expressly provide that it is retroactive, meaning that it only applies to agreements entered into on or after July 1, 2023.  Virginia employers should revise their existing agreements that are required as part of an employee’s onboarding process or are otherwise required as a condition of employment, to explicitly carve out claims of sexual harassment and sexual assault from their confidentiality, non-disclosure, and/or non-disparagement provisions.

Maryland Employers May Not Impose Non-Compete Agreements on Low Wage Workers

Effective October 1, 2023, Maryland employers may not impose non-compete, conflict of interest, or similar agreements on employees that make $41,350 or less annually.  Maryland is the latest in a line of jurisdictions to limit or prohibit the use of non-compete agreements, including its neighbors, D.C. and Virginia.

The law prohibits employers from requiring low wage employees to enter into any type of agreement that prevents them from obtaining employment with a new employer or to become self-employed in the same or similar business or trade.  Non-solicitation of client lists and other client information is expressly exempted under the law, so there is no limitation or restriction on the use of such agreements.

The salary threshold required for Maryland employees to enter into a non-compete, conflict of interest, or other type of similar agreement, has increased. Under Senate Bill 591, the salary threshold has increased to 150 percent of the state minimum wage.  This means that, as of October 1, 2023, the new threshold is $19.88 per hour (the minimum wage of $13.25 per hour x 150%) or approximately $41,350 annually. This is an increase from the previous threshold of $15 per hour or approximately $31,200 annually and means that the threshold will rise automatically as the minimum wage goes up, including this coming year.

Maryland recently passed the Fair Wage Act of 2023, which will increase the minimum wage from $13.25 to $15 per hour, effective January 1, 2024.  The minimum wage increase will therefore increase the salary threshold for the non-compete law from $19.88 to $22.50 per hour or approximately $46,800 annually.  While the threshold is based on the minimum hourly wage, it still applies to exempt employees who are paid on a salary basis, and who are paid less than the threshold amount ($41,350 in 2023 and $46,800 in 2024).

Maryland employers should prepare for the increase in the state’s minimum wage and the resultant increase in the non-compete threshold beginning in 2024.

Let us know if you have questions about these laws. Mintz’s Employment, Labor, and Benefits practice stands ready to assist Maryland and Virginia employers with questions or compliance concerns.

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