New Maryland Laws May Affect Business Owners and Managers Starting October 1, 2019

Several new laws that may be relevant to business owners and managers will take effect on October 1, 2019, after being approved by the Maryland General Assembly earlier this year.

Chapter 753 – Noncompete and Conflict of Interest Clauses

Over the last several years, many states have witnessed the gradual erosion of the enforceability of noncompetition agreements. Maryland has been no different, and pursuant to what will be Section 3-716 of the Labor and Employment Article of the Annotated Code of Maryland, additional changes are forthcoming. Under the new law, an employment contract or similar document that restricts the ability of an employee to enter into employment with a new employer, or become self-employed, in a similar trade or business shall be null and void, if the employee earns an amount equal to or less than $15.00 per hour, or $31,200 annually.

This new rule is not intended to abridge the ability of an employer to restrict an employee from taking client lists or other confidential or proprietary client-related information.

In light of this new law and changes to the law in general, all employers should review the restrictive covenants they have with employees to determine if they are still enforceable to the extent intended.

Chapter 289 – Maryland General Corporation Law – Miscellaneous Provisions

This bill clarifies the default rules of the Maryland Corporation Act concerning the removal of directors, filling vacancies on the board, indemnification of directors, informal actions of the stockholders in lieu of a meeting, and quorum requirements. While many of these default rules may be amended by the Stockholders Agreement or Bylaws of a corporation, the law may be used to fill in any gaps or clarify any ambiguity.

This bill also reduces the amount of notice that must be given to the State Department of Assessments and Taxation in advance of certain qualifying mergers.

Stockholders and directors should take this opportunity to review their Stockholder Agreements and Bylaws to ensure that they accurately reflect the intended management structure and address the ambiguities this new law is designed to clarify.

Chapter 288-Corporate Records and Electronic Transmission

Maryland corporations are required to adopt Bylaws, and to have annual stockholder meetings and regular director meetings. Copies of the Bylaws, minutes of regular meetings, as well as actions approved in lieu of a meeting, stockholder ledgers, and other documents, are all required to be kept as part of the corporation’s books and records.

This bill authorizes the corporation to keep such books and records in an electronic format if the records can be converted to a clearly legible written form for visual inspection upon request of any person entitled to inspect the records.

Chapter 91 – Department of Labor, Licensing and Regulation – Renaming

On July 1, 2019, the Department of Labor, Licensing and Regulation (“DLLR”) was renamed the Department of Labor. There were no changes to the services the former DLLR provided, including licensing and regulating various industries. The change is meant to avoid confusion about the nature and scope of the department’s activities.

If you have any questions regarding employment contracts, or any Labor and Employment question, please contact me at [email protected] or 240.507.1729