Maryland Passes Sweeping Changes to Employment Law

​Maryland legislators recently ended the 2023 session with three significant bills headed to and likely to be signed by Gov. Wes Moore.

First, Senate Bill 828 would bring sweeping changes to the Time to Care Act, Maryland's version of paid family leave.

Second, Maryland's minimum wage will increase to $15.00 sooner than employers anticipated. And third, the salary threshold under Maryland's ban on noncompete agreements will increase, providing greater protections for low-wage workers.

Changes to Maryland's Time to Care Act

Maryland's Family Medical Leave Insurance Program, also known as the Time to Care Act, was enacted during a special session on April 9, 2022, during which the Maryland General Assembly overrode then-Gov. Larry Hogan's veto. The law provides up to 12 weeks of paid leave (or 24 weeks in certain circumstances) via an insurance-like program under which covered employees apply to the state for benefits.

One key provision missing from the 2022 version of the law was the employee and employer contributions rates. Contributions were set to begin on Oct. 1, 2023. As of Jan. 1, 2025, covered employees would have been able to apply for benefits. Employees would have been required to exhaust all employer-paid leave before applying for benefits.

Senate Bill 828, which Moore is expected to sign, amends the law in the following significant ways:

• Delays the start date for employer and employee contributions to Oct. 1, 2024.
• Delays the start date for benefits payments to covered employees to Jan. 1, 2026.
• The employer/employee contribution rates are set at 50/50 percent, rather than being determined by the Maryland Department of Labor (DOL).
• The total rate of contribution (i.e., the percent of wages up to the Social Security wage base to be split 50/50 percent) must be set by the Maryland DOL by Oct. 1, 2023, and cannot exceed 1.2 percent of an employee's covered wages. That rate will remain the same from Oct. 1, 2024, through June 30, 2026.
• Employees will not be required to exhaust all employer-paid leave; however, employers will have the right to manage benefits coordination with their company-provided paid leave benefits. Employees and employers may agree to use employer-paid leave to "true up" the benefits an employee receives under the law.
  

So employers can breathe a sigh of relief this year. They will not be required to make contributions in 2023, as originally required, nor will they have to manage the benefits coordination issues that will ensue.

Employers, however, should use this time to consider how they will address benefit coordination and whether they will apply to the Maryland DOL to have a private plan that complies with the law.

Minimum Wage

Maryland Senate Bill 555, the Fair Wage Act of 2023, signed into law by Moore on April 11, accelerates the pace at which Maryland will reach a $15.00 minimum wage. Effective Jan. 1, 2024, all employers, regardless of size, must pay employees at least $15.00 per hour.

The Fair Wage Act does not impact Montgomery County's or Howard County's minimum wage increase scales. Employers with employees working in those counties must comply with the state or county's minimum wage, whichever is higher.

Employers should ensure that their payroll systems are updated as of Jan. 1, 2024, with the new minimum wage rate. For tipped employees, no change has been made the to subminimum wage of $3.63 per hour, thereby increasing the tipped credit that employers may take, provided that tipped employees have the requisite cash and/or credit card tips to cover the minimum wage rate for each hour worked. Otherwise, employers must make up the shortage, so that tipped employees earn the full minimum wage for each hour worked.

Noncompete Clauses

Maryland Senate Bill 591 is expected to be signed by Moore. It would increase the salary threshold for requiring an employee to agree to any noncompete or conflict of interest provision 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. If Moore signs the bill, it will take effect on Oct. 1.

Currently, employers may not require a prospective employee or a current employee to sign a noncompete provision if the employee earns equal to or less than $15.00 per hour or $31,200 annually. Under Senate Bill 591, the threshold would increase to 150 percent of the state minimum wage. Thus, effective Oct. 1, the threshold for large employers would be $19.88 (the current minimum wage of $13.25 x 150 percent), or approximately $41,350 annually.

Effective Jan. 1, 2024, assuming a $15.00 minimum wage rate for all Maryland employers, the threshold would be $22.50 per hour, or approximately $46,800.

Donna M. Glover is an attorney with Baker Donelson in Baltimore. All rights reserved. Reprinted with permission.