MARYLAND: An Introduction to Labor & Employment

Maryland Employment Law Overview 

Shawe Rosenthal LLP

This following is a brief summary of Maryland employment law. For a more detailed discussion, please refer to Chambers & Partners’ Guide to US Regional Employment 2022 – Maryland, which is also authored by our firm.

The Business Environment  

Maryland is a progressive state in terms of employment legislation. Democratic voters outnumber Republicans almost 2:1, and the state legislative body, the General Assembly, reflects that ratio. After two terms with a pro-business Republican Governor whose vetoes of certain anti-business bills were overridden by the General Assembly, a Democrat has taken his place. As a result, we can expect further emphasis on pro-worker legislation, building upon the recently-enacted expedited increase to a USD15 minimum wage rate, paid sick leave, and a paid family and medical leave benefits programme (which has yet to be implemented).

In part responding to social movements like the “Me Too” and “Black Lives Matter” movements, Maryland has enacted laws that greatly expand harassment and discrimination protections generally, such as the lowering of the standard for establishing illegal harassment as well as extending the time period for filing complaints of discrimination with the Maryland Commission on Civil Rights, which is the state agency charged with enforcing the state anti-discrimination law. It also vastly expanded the filing period for discrimination and harassment lawsuits under state law by tolling (eg, putting on hold) the applicable two- or three-year suit-filing period while an administrative complaint is pending – a period that can range widely from only a couple of months to several years. Specifically as to sex, Maryland expanded its Equal Pay Act to include wage transparency provisions and implemented a salary history ban. With regard to race, “protective hairstyle” was added to the list of protected personal characteristics under the anti-discrimination law, and limits were imposed on the use of an applicant’s criminal history.

Maryland has experienced an increased and well-publicised interest in union membership, arising in large part out of workplace challenges from the COVID-19 pandemic and the “Black Lives Matter” movement. Within the past several years, there have been high-profile and successful union organising campaigns in this state, including the first Apple store to be unionised, as well as the Baltimore Museum of Art. These efforts have spread across many industries and entities, including the Walters Art Museum, Starbucks stores and Amazon warehouses, as well as the burgeoning cannabis industry. Given the Biden administration’s support for unions, it is expected that union membership in Maryland will continue to grow.

The Employment Relationship  

In Maryland, the employment relationship is presumed to be at-will. This means that either the employer or employee may terminate the relationship at any time with or without cause or notice as long as the termination is not prohibited by law, by an individual contract or by a collective bargaining agreement. As to the legal limitation on the at-will doctrine, in addition to applicable federal laws, numerous Maryland laws contain protections against adverse employment actions, including termination from employment, for exercising rights under those laws.

An individual contract, which can be express or implied, may modify the at-will relationship. Such contract may be based on either verbal statements or written documents, such as offer letters, employee handbooks or employment agreements that provide for a term of employment or termination for cause. An employer may expressly disclaim the creation of such contracts by placing a clear and conspicuous disclaimer in all such written documents that reiterates the employee’s at-will status. In addition, Maryland recognises a cause of action for “abusive discharge” in violation of public policy as an exception to at-will employment. Thus, employers may not terminate an employee for refusing to engage in conduct that violates the law or for asserting rights protected by law.

Maryland employers and employees can also enter into agreements that govern other aspects of the employment relationship. Although employers are prohibited by law from including a non-compete or conflict of interest provision in an employment contract with an employee earning less than USD15 or less per hour or USD31,200 (which will increase to 150% of the minimum wage rate, effective 1 October 2023), restrictive covenants, such as non-compete or non-solicitation agreements, are generally enforceable against higher-wage employees in Maryland. The restrictions in the agreement as to geographic area and duration must be reasonably necessary for the protection of the employer’s business, must not impose an undue hardship on the employee and must not disregard the public interests. In addition, arbitration agreements are enforceable in Maryland but must be supported by mutually binding promises to arbitrate. Additionally, Maryland employers may protect confidential and proprietary business information, including trade secrets, through the use of a confidentiality agreement that specifically identifies the protected information. Under the Disclosing Sexual Harassment in the Workplace Act, however, an employer may not require a waiver of future sexual harassment or retaliation claims or take adverse action against an employee for refusing to enter into an agreement with such a waiver.

Maryland recognises other work-based but non-employee relationships, including interns and independent contractors. These individuals may be entitled to certain protections, including under the anti-discrimination law. Notably, the Maryland Department of Labor (MDOL) has a particular interest in the issue of employee misclassification – ie, when an employee is incorrectly designated as an independent contractor, thereby enabling the employer to avoid paying employment taxes and benefits.

Discrimination, Harassment, and Retaliation  

Maryland law protects employees, independent contractors, and interns from employment discrimination and harassment on the basis of race, protective hairstyles, colour, religion, sex, age, pregnancy, national origin, marital status, sexual orientation, gender identity, disability, or genetic information or because of the individual’s refusal to submit to a genetic test or make available the results of a genetic test. In addition, individuals are protected from retaliation for asserting rights under the law. The law further requires employers to provide reasonable accommodations for disabilities, specifically including those caused or contributed to by pregnancy, as well as to applicants for employment.

This anti-discrimination law applies to employers with 15 or more employees, except that if a harassment claim is involved it applies to employers with a single employee. Until 2022, Maryland law was consistent with federal law in requiring conduct to be “severe or pervasive,” among other things, in order to constitute unlawful harassment. A 2022 revision, however, specifically removes that requirement in the following three situations involving “unwelcome and offensive conduct”:

1. submission to the conduct is made a term or condition of an individual’s employment, whether explicitly or implicitly;
2. submission to or rejection of the conduct is used as the basis for employment decisions about the individual; and
3. based on the totality of the circumstances, the conduct unreasonably creates a working environment that a reasonable person would perceive to be abusive or hostile.

The revision also added a new definition of “sexual harassment” as conduct “that consists of unwelcome sexual advances, requests for sexual favors, or other conduct of a sexual nature.” Again, such conduct need not be severe or pervasive under the same three situations set forth above.

Maryland’s Equal Pay for Equal Work Statute prohibits discriminatory pay practices based on sex or gender identity against employees who work in the same establishment and perform work of comparable character or work on the same operation, in the same business or of the same type. The law also contains pay transparency provisions that protect employees’ rights to discuss their pay.

Compensation and Benefits  

With regard to compensation, employees are designated as either “exempt” or “non-exempt” from the requirements to pay the minimum wage rate and overtime premiums under the Maryland Wage and Hour Law and the Federal Fair Labor Standards Act (FLSA). Maryland law generally follows the FLSA, but sets a higher state minimum wage, currently USD13.25 for employers with at least 15 employees and USD12.80 for those with fewer than 15 employees. Under a 2023 revision to the law, the rate will increase to USD15 for all employers effective 1 January 2024.

The payment of wages is governed by the Maryland Wage Payment and Collection Law. Employers must provide notice of the pay days, leave benefits and rate of pay at the time of hiring. With each paycheck, employers must also provide a statement of gross earnings and deductions as well as the amount of earned sick and safe leave available to the employee. Employers must pay an employee’s wages at least every two weeks or twice a month. Payment must be made by cash or cheque and, with the employee’s consent, may be made by direct deposit or to a debit card. Upon termination of employment, the final paycheck must be issued by the next regular payday following the termination.

Only certain deductions may be made from employees’ paychecks under Maryland law. These are as follows: 

1. amounts that an employer is required or empowered to deduct in accordance with state or federal law;
2. deductions expressly authorised by the employee in writing;
3. deductions ordered by a court; and
4. deductions allowed by the Commissioner of Labor and Industry because the employee has received full consideration for the deduction.

Certain benefits are required by law. Among the more significant, the Maryland Healthy Working Families Act requires employers to provide earned sick and safe leave to their eligible employees. Employers with 15 or more employees are required to provide paid leave accrued at a rate of one hour for every 30 hours worked to a maximum of 40 hours a year. Employers with fewer than 15 employees, however, need only provide unpaid leave.

In addition, Maryland has passed legislation to create a paid family medical and leave benefits programme. It will provide eligible employees with 12 weeks of paid family and medical leave, with the possibility of an additional 12 weeks of paid parental leave (for a possible total of 24 weeks of paid leave). This programme will be administered by the State and funded by contributions from employers and employees, the amount of which will be determined by the Secretary of Labor. Contributions will begin 1 October 2024, and benefits will be paid starting 1 January 2026. The Maryland Department of Labor will issue regulations to implement the provisions of the law.

Other types of statutory leaves include parental leave (applicable to employers with 15-49 employees), organ and bone marrow donation leave, day of deployment leave, jury and witness duty leave, crime victim leave, voting leave, civil air patrol leave, and emergency volunteer leave.

Maryland employers are not required to provide paid vacation or paid time off (PTO). If they choose to do so, they should state in the policy document whether accrued, unused vacation or PTO will be paid out upon termination or not; the failure expressly to state that vacation or PTO will not be paid out will make such payment mandatory. The leave policy must be in writing and communicated to the employee at the time of hire.

With regard to retirement benefits, Maryland has created the Maryland Small Business Retirement Savings Program and Trust for smaller employers. All employers that use an automatic payroll system and do not have an employer-sponsored retirement plan may participate in this programme.

As to healthcare benefits, Maryland does not require employees to provide healthcare insurance to employees, but those who choose or are required by federal law to do so should be aware of state coverage requirements. Examples of required coverage include mammograms, in vitro fertilisation, home healthcare services and hospice benefits. Maryland employers are required to provide workers’ compensation insurance, which provides compensation and healthcare benefits for employees who suffer an on-the-job injury or illness.