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Maryland Employers Must Prepare for Six New Employee-Friendly Laws

Employers of Maryland workers should be aware of several employee-friendly changes made to Maryland employment laws, many of which go into effect on October 1, 2019.

Some of these laws appear to be a continued response to issues of inequality for women in the workplace. Other laws simply seem to expand workers’ rights generally by increasing the minimum wage, mandating that employers make unpaid leave available to employees who donate organ and bone marrow, and prohibiting the use of non-compete clauses for low-wage earners.

Anti-Discrimination and Harassment

The Maryland General Assembly made several significant revisions to the state’s anti-discrimination and harassment law that will go into effect October 1, 2019. Perhaps the most significant change is that independent contractors are now permitted to bring discrimination and harassment claims against employers for the first time. Previously claims could only be brought by employees. In addition, harassment claims can now be brought by workers against employers of any size. When it comes to harassment claims only, gone is the requirement that the employer employ fifteen or more employees, in order to be subject to the state’s law.

The time that a worker has to file a claim of harassment with the Maryland Commission on Civil Rights has been extended from six months to two years after the date on which the harassment takes place, and the time period for filing a lawsuit following the prerequisite administrative claim will be extended from two to three years. The General Assembly also has now made abundantly clear by explicitly providing that illegal harassment under Maryland law includes harassment on all of the state’s protected bases: race, color, religion, ancestry or national origin, sex, age, marital status, sexual orientation, gender identity, or disability.

In light of these changes small employers with less than 15 employees now need to ensure that they have effective anti-harassment policies with effective reporting procedures and are training their teams on what constitutes discrimination and harassment and to whom complaints can be made. In addition, employers working with independent contractors should educate their managers that contractors may bring harassment and discrimination claims and provide contractors with the employer’s anti-discrimination and anti-harassment policies and include them in workplace trainings on these topics with the goal of encouraging contractors to report issues internally so that they may be addressed by the employer.

Civil Penalties for Violating the Equal Pay for Equal Work Law

The Equal Pay for Equal Work law prohibits Maryland employers from paying a lower wage or providing less favorable employment opportunities based on sex and gender identity. Under the new amendment to the law, effective October 1, 2019, repeat offenders are required to pay civil financial penalties. Thus, an employer who violates the law two or more times within a three year period may be required to pay a civil penalty equal to 10% of the damages owed by the employer subject to the discretion of a Commissioner of Labor and Industry or a court.

Minimum Wage – Fight for Fifteen

Changes to Maryland’s minimum wage law took effect on June 1, 2019. The current hourly rate will increase from $10.10 to $15.00 by 2025. The change is to be gradual, so employers with 15 or more employees can expect the following schedule for the increased minimum wage:

  • January 1, 2020: $11.00
  • January 1, 2021: $11.75
  • January 1, 2022: $12.50
  • January 1, 2023: $13.25
  • January 1, 2024: $14.00
  • January 1, 2025: $15.00

Small employers with fewer than 15 workers will have until mid-2026 to reach the $15 minimum wage. Their schedule is as follows:

  • January 1, 2020: $11.00
  • January 1, 2021: $11.60
  • January 1, 2022: $12.20
  • January 1, 2023: $12.80
  • January 1, 2024: $13.40
  • January 1, 2025: $14.00
  • January 1, 2026: $14.60
  • July 1, 2026: $15.00

The bill charges the Board of Public Works to analyze U.S. Bureau of Labor Statistics trends each year. Upon determination that current employment shows a negative trend the Board is authorized to temporarily suspend the scheduled increase on a one-time basis. Though the bill leaves the minimum tipped wage unaltered (currently this is $3.63 per hour and employers may take a tip credit for the difference between this amount and the minimum wage), the Commissioner of Labor and Industry is required to adopt regulations requiring restaurant employers that include a tip credit as a part of the wage of an employee to provide tipped employees with a written or electric wage statement for each pay period showing the effectively hourly tip rate – derived from employer-paid cash wages and reported tips.

Please note that Montgomery County and Prince George’s County have higher minimum wages. In Montgomery County for employers with 51 or more employees, the wage is $13/hour, and $12.50 for employers with 50 or fewer employees. Montgomery County law raises the minimum wage incrementally, each July 1, until it reaches $15 per hour in 2022. In Prince George’s County the minimum wage to be paid by all employers is $11.50/hour until December 31, 2020; after January 1, 2021 the State minimum age law applies.

Organ and Bone Marrow Donation

As of October 1, 2019, employers with 15 or more employees must provide eligible-employees who donate an organ with 60 business days of unpaid leave in any 12-month period. Eligible employees who donate bone marrow are entitled to up to 30 days of unpaid leave during any 12-month period. To be eligible, employees must have been employed by the employer for at least a year and worked 1,250 hours during the prior 12 months. The employer may require written verification from a physician about the employee’s donor status and the medical necessity for the donation. For the duration of the leave, the employee is entitled to continuation of group health coverage. Moreover, the leave may not be considered a break in service for purposes of the employee’s right to salary adjustments, sick leave, vacation, paid time off, annual leave or seniority.

This unpaid leave does not concurrently run with any leave under the Family and Medical Leave Act, however the protections are similar. Upon return, the employee is entitled to reinstatement to the same or an equivalent position, unless the employee is being terminated for reasons unrelated to the leave. If an eligible employee works on a commission basis, the employer must pay to the employee, during the leave, any commission that becomes due because of work performed before taking the leave.

Employers with workers in Maryland should implement a policy educating their employees on the availability and terms for taking this leave.

Prohibition on Non-compete and Conflict of Interests Clauses for Low Wage Workers

Effective October 1, 2019, Employers are prohibited from including a non-compete or conflict of interest provision in an employment contract for employees earning $15 or less per hour or $31,200 or less annually. Employment contracts with such provisions are considered null and void. Thus, if employers have such agreements in place they will become unenforceable when the law takes effect. This means that employers will no longer be able to prohibit these low wage workers from “moonlighting” or taking other jobs while employed or to restrict the jobs that they take post employment.

There is a carve out in the law for agreements containing restrictions on the taking or using of client lists or other proprietary client-related information. Therefore it appears that employers may require these low wage workers to enter into confidentiality and non-disclosure agreements to protect client lists and client-related information from disclosure. The law does not address non-solicitation agreements which are agreements through which the employee agrees not to solicit the business of an employer’s customers or solicit an employer’s employees to work elsewhere.

Notably the law provides that the restriction is enforceable even if the agreement was entered into in another state. While this clarifies that the location where the employee signed the agreement is not controlling where the employee is working in Maryland, it does not make clear whether this would have any effect on an agreement containing a choice of law provision that provides for application of another state’s law.

Gender Diversity in the Boardroom

Under longstanding Maryland law, businesses formed, qualified, or registered to do business in Maryland must, every April 15, submit annual reports on personal property to the state’s Department of Assessment and Taxation. This is done by filing the appropriate form generated by the Department or by using the online portal, Maryland Business Express.

With the passage of the new Gender Diversity in the Boardroom bill, eligible businesses, i.e., tax exempt domestic nonstock corporations with an operating budget exceeding $5 million and domestic stock corporations with sales exceeding $5 million, must now include in the annual report:

  1. The total number of members of the Board of Directors and
  2. The total number of female board members.

The 2020 Form Annual Reports have yet to be promulgated by the Department; however, businesses can expect to easily answer both questions at nominal marginal cost. Although the preamble to the bill “[u]rges that by December 31, 2022, all nonprofit, privately held, and publicly traded institutions and companies doing business in the state of Maryland have a minimum of 30% of women directors[,]” the new bill merely mandates the aforementioned reporting requirement. A sunset provision terminates this reporting requirement in 2029.

Law clerk Andrew Dam contributed to this report.

Julie Reddig and Nida Kanwal are employment attorneys who represent management in workplace employment matters. For more information on the new laws impacting Maryland employers, contact Julie at jareddig@lerchearly.com or Nida at nkanwal@lerchearly.com.

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This content is for your information only and is not intended to constitute legal advice. Please consult your attorney before acting on any information contained here.

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