Maryland and Virginia Update Employment Agreement Laws

Maryland and Virginia are two of the latest states to enact new employee protection laws that affect the use of employment agreements, such as non-compete, non-disclosure, and non-disparagement clauses. These laws aim to protect the rights and interests of employees, especially those who are victims of sexual harassment or who earn low wages.

Virginia Bans Non-Disclosure Agreements for Sexual Harassment Claims

Virginia is following the lead of other states with similar laws, such as New Jersey, New York, Washington, and California, as well as provisions under the federal Speak Out Act. The Speak Out Act prohibits the enforcement of non-disclosure and non-disparagement agreements related to allegations of sexual assault or sexual harassment that are entered “before the dispute arises.”

Employers are now prohibited from requiring employees to enter non-disclosure, confidentiality, or non-disparagement agreements that relate to claims of sexual harassment. HB 1895, which took effect on July 1, 2023, amends an existing Virginia law that already covers sexual assault. The law applies to prospective and current employer agreements that are entered into as a “condition of employment.” Additionally, the law does not indicate whether it is retroactive, meaning it may only apply to agreements entered on or after July 1, 2023.

It likely applies to non-disclosure, confidentiality, and non-disparagement agreements that employees enter into at the beginning of their employment and may not apply to a severance or other post-employment agreement. It is also unclear whether it applies to settlement agreements executed during an employee’s employment if the settlement agreement is a condition of continued employment.

Employers who violate the law may face civil penalties of up to $10,000 per violation.

Maryland Raises Salary Threshold for Non-Compete Agreements

Under existing Maryland law, employers cannot impose non-compete, conflict of interest, or similar agreements on employees unless they meet a certain wage or salary threshold. Maryland’s new state law, SB 591, raises the wage and salary thresholds.

The law, in effect as of October 1, 2023, raises the salary threshold to 150 percent of the state minimum wage, or a salary of $41,350 annually in 2023. On January 1, 2024, the state’s minimum wage will increase from $13.25 per hour to $15 per hour, increasing the salary threshold for the non-compete law to approximately $46,800 annually.

The law defines a non-compete agreement as an agreement restricting an employee’s ability to enter employment with a new employer or become self-employed in the same or similar business or trade. The law does not apply to agreements that protect confidential information, trade secrets, client lists, or customer relationships.

Employers who violate the law may be liable for actual damages and attorneys’ fees.

How Does This Impact Employers?

Although these laws apply directly to Maryland and Virginia employers, employees who have lived in these states and employers who hire remotely in these states may also be subject to these requirements.

More and more states are creating or updating employee protection laws. Laws similar to those in Maryland and Virginia could become a model for other states to follow, so employers may want to monitor the situation and consult their legal counsel to review their current job postings and hiring policies.

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