On April 25, 2024, Maryland joined the growing trend of legislatures and governmental agencies restricting the enforceability of non-compete agreements by enacting H.B. No. 1388, which prohibits non-compete agreements for veterinarians and certain healthcare professionals and limits non competes for other healthcare professionals.

Prior to H.B. 1388, Maryland had limited statutory restrictions on non-compete agreements. In 2019, Maryland enacted Section 3-716 of the Labor and Employment Article of the Maryland Code, which only prohibited non-compete agreements involving employees who earned equal to or less than 150% of the State’s minimum wage rate.

H.B. 1388 amended Section 3-716 and expanded its scope for both veterinarians and other healthcare professionals meeting certain identified criteria.

VETERINARIANS

H.B. 1388 expanded Section 3-716’s applicability to veterinary practitioners and veterinary technicians. The portions of H.B. 1388 pertaining to veterinary practitioners and veterinary technicians are effective as of June 1, 2024. Under those portions, any “noncompete or conflict of interest provision in an employment contract or similar document or agreement that restricts the ability of an employee to enter into employment with a new employer or to become self-employed in the same or similar business or trade shall be null and void as being against the public policy of the State.”

HEALTHCARE PROFESSIONALS

H.B. 1388 also expanded Section 3-716’s scope to healthcare professionals meeting certain identified criteria. But, unlike the immediate applicability to veterinary practitioners and technicians, the portions of H.B. 1388 pertaining to healthcare professionals apply only to employment contracts or similar documents or agreements that are executed on or after July 1, 2025.

H.B. 1388 does not apply to all healthcare professions. It’s applicability is limited to two categories of healthcare professionals. Under both categories, for H.B. 1388 to apply, the employee must be required to be licensed under the Health Occupations Article and provide direct patient care. But, health professionals making equal to or less than $350,000 in total annual compensation fall into the first category, while health professionals making more than $350,000 in total annual compensation fall into the second category.

For professionals making equal to or less than $350,000, H.B. 1388 provides that any “noncompete or conflict of interest provision in an employment contract or similar document or agreement that restricts the ability of an employee to enter into employment with a new employer or to become self-employed in the same or similar business or trade shall be null and void as being against the public policy of the State.” In essence, it applies the same prohibition on non-competes that it applies to veterinary practitioners and technicians.

For professionals making more than $350,000, non-compete agreements will only be valid if the are limited to one year or less and have a geographic scope that does not exceed 10 miles from the primary place of employment. Additionally, upon the request of a patient, the former employer must provide a patient notice of the new location in which the former employee is practicing.

MOVING FORWARD

As we have seen, non-compete have drawn the ire of legislatures and other regulatory agencies. As limitations and restrictions on non-competes mount, it is imperative that employers closely monitor the enforceability of its current employment agreements and to adequately plan and strategize to ensure that employers protect their legitimate business interests by legal and enforceable means.