November 30, 2023
In the ever-evolving landscape of employment laws, Maryland and Virginia have recently changed regulations governing noncompete, confidentiality, nondisclosure, and nondisparagement agreements. These legal developments aim to strike a balance between protecting employers’ interests and safeguarding employees’ rights. In this blog post, we’ll delve into the specifics of these changes and explore how they impact the employment landscape in these states.
The Speak Out Act was enacted on October 1, 2023; Virginia employers face new restrictions on using nondisclosure, confidentiality, and nondisparagement agreements concerning sexual harassment claims. Virginia’s House Bill 1895 amends existing legislation that already covers sexual assault, signaling a heightened focus on addressing workplace harassment.
Limitations and Scope:
The prohibition outlined in the Virginia House Bill specifically targets provisions in nondisclosure or confidentiality agreements that pertain to sexual harassment claims. The law does not extend to other types of claims or disputes, allowing employers to maintain legitimate confidentiality requirements for non-harassment-related matters. This law exclusively pertains to prospective and current employees; it does not extend to independent contractors or other non-employment relationships.
Virginia joins several states with similar laws, including California, New Jersey, New York, and Washington.
Limitations on Noncompete Agreements
Senate Bill 591 went into effect October 1, 2023, placing restrictions on noncompete agreements. Maryland employers are prohibited from imposing noncompete, conflict of interest, or similar agreements on employees earning 150 percent of the minimum wage. This translates to $19.88 per hour (calculated as 150 percent of the minimum wage of $13.25 per hour) or an estimated annual income of around $41,350.
It represents a notable increase from the previous threshold of $15 per hour or roughly $31,200 annually. The adjustment ensures that the threshold will automatically increase alongside any future increments in the minimum wage.
This change aims to protect low-wage workers from being unfairly restrained in their employment opportunities. By limiting the application of noncompete agreements based on income, Maryland seeks to promote greater workforce mobility and job market competitiveness, particularly for those in lower-income brackets.
The law explicitly excludes the restriction or limitation of nonsolicitation agreements concerning client lists and other client information.
Fair Wage Act of 2023
Maryland also recently enacted the Fair Wage Act of 2023, effective January 1, 2024, which increases the minimum wage from $13.25 to $15 per hour. This adjustment in the minimum wage will also raise the salary threshold for non-compete laws from $19.88 to $22.50 per hour, equating to an annual income of approximately $46,800. While the threshold is tied to minimum wage employees, it still applies to exempt salaried employees if they earn below the designated threshold ($41,350 in 2023 and $46,800 in 2024).
For employees under the age of 18, employers may pay employees 85% of the state minimum wage.
Impact of the Fair Wage Act
Employers with 15 or more employees raise the minimum wage from $13.25 an hour to:
- $14.00 an hour beginning on January 1, 2024.
- $15.00 an hour from January 1, 2025, and beyond.
Employers with 15 or fewer employees raise the minimum wage from $12.80 an hour to:
- $13.40 an hour beginning on January 1, 2024.
- $14.00 an hour beginning on January 1, 2025.
- $14.60 an hour beginning on January 1, 2026.
- $15.00 an hour from July 1, 2026, and beyond.
As the legal landscape surrounding employment agreements continues to shift, employers must stay informed and proactive in navigating these changes. Maryland’s restrictions on noncompete agreements and Virginia’s heightened focus on addressing workplace harassment represent significant milestones in the ongoing effort to balance protecting business interests and fostering a fair and equitable work environment. Employers and employees alike should be aware of these changes and seek legal guidance when necessary to ensure compliance and fair treatment in the workplace.
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Disclaimer: The purpose of this information is solely to provide general knowledge and should not be construed as legal advice. Consult with your legal counsel to ensure your policies comply with current laws and regulations.