On April 25, 2024, Governor Wes Moore signed into law new legislation prohibiting non-compete and conflict-of-interest clauses for certain veterinary and health care professionals in the state of Maryland. The enactment of this law follows the Federal Trade Commission's recently announced final rule1 banning non-compete agreements for most employees in the United States. Maryland already limits non-compete restrictions for lower-wage workers, and this new law continues a trend of narrowing the scope of employees who may be subject to a non-compete.
The new Maryland law, entitled Noncompete and Conflict of Interest Clauses for Veterinary and Health Care Professionals and Study of the Health Care Market (the "Act"), expands Maryland Code Section 3-716 to prohibit non-compete provisions for individuals who are:
- required to be licensed under Maryland's Health Occupations Article (e.g., physicians, physician assistants, nurse practitioners, nurses, dentists, pharmacists, psychologists, optometrists, etc.), employed in a position that provides direct patient care, and earn equal to or less than $350,000 in total annual compensation; or
- licensed as a veterinary practitioner, veterinary technician pursuant to Title 2, Subtitle 3 of Maryland's Agriculture Article.
The law becomes effective for covered veterinary practitioners and technicians on June 1, 2024, and for covered health care providers on July 1, 2025. In addition, for covered health care providers described above who earn more than $350,000 in total annual compensation, the law limits the maximum allowable time and geographic scope of non-competes and conflict-of-interest provisions. Covenants for these higher-earning health providers cannot exceed one year from the last day of employment, and may not restrict the provider from working a geographic region greater than 10 miles from their primary place of employment. Further, the new law provides that, with respect to these higher-earning healthcare providers, employers must provide notice to the provider's patients, if asked by the patient, as to the new location where the provider will be practicing. These limitations for higher-earning health providers also become effective on July 1, 2025.
In addition to prohibiting and limiting non-competes for the veterinary and health care providers described above, the new law requires the Maryland Health Care Commission to contract with a private consultant to study, in consultation with relevant stakeholders, certain issues related to the health care market within Maryland. Specifically, the law compels the Commission to study the effects of private equity firms and the payer mix for physician practices and groups with private equity ownerships, as well the impact of hospital consolidations and acquisitions on physician practices. The Act requires the Commission to report their findings by January 1, 2025.
The new law expands Maryland's recently enacted law banning non-competes, which became effective January 1, 2024, that bans non-competes for employees in the state making less than an annualized compensation that equals 150% of the current minimum wage. For 2024, Maryland's minimum wage is $15.00 per hour, so the compensation threshold for non-compete agreements is $22.50 per hour, which is equivalent to $46,800 annually.
Employers with veterinary and healthcare employees in Maryland should review their agreements with their employment counsel to ensure compliance with the new law.
Footnote
1. The FTC final rule exempts from its coverage pre-existing non-compete agreements with "Senior Executives" who are defined as workers (a) in a "policy-making position" (as defined by the final rule); and (b) earning an actual or annualized sum of $151,164 (through salary, bonuses, and/or commissions, but excluding fringe benefits, retirement contributions, and medical/life insurance premium payments). Click here for further discussion and analysis of the new FTC rule.
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