Employers in Maryland and Virginia should be aware of new laws that affect noncompete, confidentiality, nondisclosure, and nondisparagement 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 nondisclosure, confidentiality, and/or nondisparagement 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 noncompete agreements upon employees who 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.
Virginia Employers
Effective July 1, 2023, Virginia employers are prohibited from requiring employees to enter into confidentiality, nondisclosure, or nondisparagement agreements that relate to claims of sexual harassment or sexual assault. 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 nondisclosure and nondisparagement agreements related to allegations of sexual assault or sexual harassment that are entered into before the dispute arises. Employers should note that this law only applies to prospective and current employees, and it does not apply to, for example, independent contractors or other non-employment relationships.
The Virginia law applies to agreements that are entered into as a condition of employment, so it will likely be interpreted as applying to nondisclosure, confidentiality, or nondisparagement agreements that employees enter into at the beginning of their employment and not to severance or other post-employment agreements. 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 Virginia 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, nondisclosure, or nondisparagement provisions.
Maryland Employers
Effective Oct. 1, 2023, Maryland employers may not impose noncompete, 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 noncompete agreements, including its neighbors Washington, D.C., and Virginia.
The Maryland 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. Nonsolicitation 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 noncompete, 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 Oct. 1, 2023, the new threshold is $19.88 per hour (the minimum wage of $13.25 per hour x 150 percent), or approximately $41,350 annually. This is an increase from the previous threshold of $15 per hour or approximately $31,200 annually. It means that the threshold will rise automatically as the minimum wage goes up.
Maryland recently passed the Fair Wage Act of 2023, which will increase the minimum wage from $13.25 to $15 per hour, effective Jan. 1, 2024. The minimum wage increase will therefore increase the salary threshold for the noncompete 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 noncompete threshold, beginning in 2024.
David Barmak and Danielle M. Bereznay are attorneys with Mintz in Washington, D.C. © 2023 Mintz. All rights reserved. Reprinted with permission via Lexology.