The Maryland Job Applicant Fairness Act will prohibit employers from using credit reports (or credit history) in making employment decisions such as whether to hire a prospective employee, discharge a current employee, or determine compensation and other terms and conditions of employment.  There are several exceptions under the law.  Employers who have a bona fide purpose for requesting or using a credit report that is substantially job-related and disclosed in writing are exempted.  The law identifies several positions that fit this criteria, including managerial positions that involve setting the direction or control of a business or portion of a business, positions that involve access to personal information (except for personal information customarily provided in retail transactions) or that involve a fiduciary responsibility to the employer, positions that are provided expense accounts or corporate cards, and positions that have access to trade secrets or other confidential business information.

Employers who violate the law may be subject to civil penalties of up to $500 for an initial violation, and $2,500 for subsequent violations.  The law does not prohibit employers from using a consumer report or investigative consumer report that is authorized under the Federal Fair Credit Reporting Act and does not involve credit information.

Ecology Services, a waste management company, employed a group of employees who had each executed covenants not to compete during their employment.  The covenants prohibited the employees from engaging in any business similar to Ecology Services or working for a competitor within a 100 mile radius and for a period of one year.  Upon expiration of two service contracts between Ecology Services and the National Institutes of Health (“NIH”), some of the employees working under the contracts began working for Clym, a competitor of Ecology Services who had now taken over the NIH contracts.  Ecology Services filed suit against the employees and Clym, alleging breach of the covenants not to compete.  The circuit court granted summary judgment for Clym and the employees, and Ecology Services filed an appeal.

The appellate court began its analysis by stating that under Maryland law, covenants not to compete may generally only be enforced against employees who provide unique services or to prevent misuse of trade secrets, client lists, or solicitation of customers.  Further, restrictions in covenants not to compete must be “confined within limits which are no wider as to area and duration than are reasonably necessary for the protection of the business of the employer and do not impose undue hardship on the employee or disregard the interests of the public.”  The court stated that when covenants not to compete are reasonable on their face as to both time and space, the factors for determining enforceability are:

whether the person sought to be enjoined is an unskilled worker whose services are not unique; whether the covenant is necessary to prevent the solicitation of customers or the use of trade secrets, assigned routes, or private customer lists; whether there is any exploitation of personal contacts between the employee and customer; and, whether enforcement of the clause would impose an undue hardship on the employee or disregard the interests of the public.

Since the parties did not dispute the reasonableness of the covenants’ time and space restrictions, the court analyzed the covenants’ enforceability under the factors specified.  The court noted that here there was no evidence that Ecology Services benefited from the personal contacts between the employees and NIH with respect to the service contracts, and the fact that the contracts were awarded through a competitive bidding process reinforced that conclusion.  The court also held that there was no evidence that the employees had access to trade secrets during their employment with Ecology Services.  With respect to the employees’ skills, the court stated that even though their positions required education and training, these job qualifications were insufficient to create an issue of fact that their skills were unique to the extent that it would be difficult to replace them.  The court also found that enforcement of the covenants would impose undue hardship on the employees based on the length of time they worked at NIH, and that the other employment opportunities offered to them by Ecology Services were not similar in function or pay as their previous employment.  Finally, the court noted that enforcement of the covenants would reduce the number of eligible employees for government contracts.  Finding that the factors weighed heavily against enforceability, the court affirmed summary judgment for Clym and the employees.

The court’s opinion can be found here.  (hat tip to Maryland Employment Law blog)

First, the amendment established a new administrative procedure for unpaid wage claims of less than $3,000.  Md. House Bill 404 (2010).  A complaint for these small claims can be filed with the Commissioner of Labor & Industry, who in turn has the authority to investigate the claim and issue an order for payment.  The employer has 30 days in which to request a hearing, after which the order becomes final and enforceable in court.

Second, the amendment changed the definition of “wages” under the WPCL.  Md. Sen. Bill 694.  (Bill history here.)  Previously, overtime claims could only be brought pursuant to the federal Fair Labor Standards Act (“FLSA”) or Maryland’s Wage Payment Act.  Now, the WPCL “wages” includes overtime wages, meaning they will be susceptible to the treble damages provision, which are available when monies are withheld for anything other than a bona fide dispute. 

The new provisions are effective October 2010.

The law imposes penalties of up to $1,000 (and up to $5,000 if done knowingly) on employers who misclassify their employees, and places the burden on the employer to show that an independent contractor relationship exists.  The law establishes the following guidelines for determining whether a worker is an independent contractor:

1) The individual who performs the work is free from control and direction over its performance both in fact and under the contract;

2) The individual customarily is engaged in an independent business or occupation of the same nature as that involved in the work; and

3) The work is either outside the usual course of business of the person for whom it is performed, or it is performed outside of any place of business of the person for whom it is performed.

The new law also grants the Commissioner of Labor and Industry the power to investigate potential violations by entering worksites to gather information, including copying records and interviewing workers.  If the Commissioner finds a violation, he can issue a citation to the employer.  The employer can then request a hearing before an administrative law judge, whose decision is appealable to the circuit court.  If a final order is not issued, a worker who feels he was misclassified can bring a civil action against the employer for damages, including attorneys’ fees.

The law also imposes recordkeeping requirements for employers who hire independent contractors, including written notice to the contractor of his status at the time of hire and an explanation of the implications involved.  Employers must also keep records containing the classification of all employees, their rate of pay, the amount paid each pay period, and hours worked.

Contributed by Claudia L. Guzman

The Act obliges employers to allow employees to use accrued leave time for care of a family member, at the employee’s discretion.  It requires only those employees who have already accrued paid leave to use it to care for a family member as opposed to requiring a request for unpaid leave of up to 12 weeks under the FMLA.  Any kind of paid leave that has been accrued before and after the law’s effective date including sick time, vacation or personal days, floating holidays, or comp time can be used under the Act.

Any employee who uses the provisions of the Act but is covered by a collective bargaining agreement must also comply with the terms of that agreement.  The employee must further comply with any leave policies the employer already has in place.  Notably, under the Act employer’s respective notice requirements must be followed.  In addition, if the employer’s paid leave policy is more generous than the Act’s, the more generous option must be implemented.  Conversely, if the employer’s policy is stricter than the Act, the Act’s minimum requirements must be followed.  For instance, if an employer allows leave only for personal illness, the Act’s provisions must be applied by the employer.  Finally, the Act contains a non-retaliation provision.  Employers may not take adverse employment action against an employee who takes paid leave under the Act, or who complains about violations of the Act or participates in an investigation or legal act. 

The Act creates a number of new obligations for employers in Maryland for which there are just as many unanswered questions.  First, the Act does not specify the type of illness that is sufficient to trigger coverage.  The word “serious” is conspicuously missing from the Act’s illness language.  Unlike the FMLA or ADA, there is no specific definition of what constitutes an “illness” under the Act.  Legislators supporting the Act aspired for the requirement of a qualifying illness to be very light.  With no definition (or guidance) provided, currently under the Act if an employee has available sick leave, he would presumably be able to take time to care for himself or a member of his immediate family (including children and parents) who is suffering from a minor illness, without providing notice to his employer.

The specific types of employee leave that may be used under the Act are likewise not provided.  The statute does not define or limit “leave with pay” other than to reference sick leave, vacation time, and compensatory time.  Other forms of paid leave, such as disability leave, therefore may or may not also be considered “leave with pay” under the Act.  Under such a scenario, a potentially hefty amount of leave could be available for employees under the Act.  

Further, the definition of who qualifies as an employee’s “immediate family” is nowhere to be found in the Act.  The Act states only that it applies to illnesses of “a child, spouse, and parent.”  The Act does not include a clear or specific definition of who qualifies as a “child” or a “parent.”  Similar issues have come up in the implementation of the FMLA, where the term “child” includes step-children, foster children, and others for whom the employee acts as guardian.  Questions regarding the application of the Act in relation to such situations as same-sex partners and adult children are not acknowledged by the Act’s language and are sure to be issues.

In light of the Act, existing leave policies should be reviewed by employers.   Employers should also confer with their employment counsel to ensure that their policies or agreements comply with the Act.  Employers should also be aware of any additional opinion letters issued by the Maryland Attorney General and make additional modifications to their leave policies.  Additionally, the Maryland Chamber of Commerce has recently garnered significant support for amendments to the Act containing definitions.  Any such amendment would be welcomed by employers.

While the breadth of the Act is currently mostly unexplored, employers can still take some preventative actions to avoid unnecessary liability and headaches under the Act.  For instance, employers may want to consider implementing procedures for employees who elect to take leave.  A requirement that employees who take paid leave for an illness provide some documentation about the type of illness that prompted the leave request would be reasonable.  As stated above, however, the Act does not define the term “illness.”  Thus, a specific request for a doctor’s note may not be deemed reasonable under the Act.  Nondiscriminatory verification procedures, similar to those used for FMLA leave, could be used to confirm the reasons for the requested leave.  In addition, employers are able to put procedures in place to require a certain period of notice from employees who intend to take paid leave.  Thus, with notice requirements implemented, employers could avoid many potential abuses of the Act.  Moreover, the possibility of unexpected employee requests or flexible leave to care for himself, a child, or a parent could be diminished with the implementation of simple procedures such as the above.

Contributed by Michael Wilson Stoker

On May 19, 2009, amendments to the flexible leave law were passed as emergency legislation.  Governor Martin O’Malley signed the law into effect.  The amendments clarified the following:

• “Immediate family member” now means instead of includes a child, spouse or parent
• “Child” is an adopted, biological or foster child, stepchild, or legal ward who is: (I) under 18 years, or (II) at least 18 years and incapable of self-care due to mental or physical disability; and
• “Parent” is an adoptive, biological, or foster parent, a stepparent, a legal guardian, or a person standing in loco parentis.
• “Employer” is defined as someone who “employs 15 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year.”
• “Employee” is someone who is primarily employed in the State.
• “Leave with pay” includes sick leave, vacation time, paid time off, and compensatory time. However, it does not include:
  • a benefit provided under an employee welfare benefit plan subject to Federal Employee Retirement Income Security Act of 1974;
  • an insurance benefit including benefits from an employer’s self-insured plan;
  • worker’s compensation;
  • unemployment compensation;
  • a disability benefit; or
  • a similar benefit.

Reference:  Md. SB 562 (2009) Labor and Employment Flexible Leave

Contributed by K.C. Osuji

In her complaint, Gasper alleged, among other things, sexual harassment, retaliation, and negligent hiring and retention.  On defendant’s motion, the circuit court dismissed the negligent hiring and retention claim, finding that it was preempted by the state’s anti-discrimination and workers’ compensation statutes.  After a jury trial, the court entered judgment for the defendant on the remaining claims.

On appeal, Gasper argued that the circuit court erred in instructing the jury on the burden of proof with regards to the retaliation claim.  The jury was instructed that the plaintiff needed to show that her opposition to the alleged harassment was the “determining factor” in the defendant’s decision to terminate her.  The Court of Special Appeals cited two U.S. Supreme Court cases that lay out the proper standard for retaliation claims.  In Desert Palace, Inc. v. Costa, 539 U.S. 90 (2003), the Supreme Court stated that a plaintiff must show that being a member of a protected class was a “motivating factor” in the employment action.  In Price Waterhouse v. Hopkins, 490 U.S. 228 (1989), the Supreme Court used similar motivating factor language in its discussion of a plaintiff’s burden of proof in retaliation claims. 

Pointing to its decision in Magee v. Dansources Technical Services, Inc., 137 Md. App. 527 (2001), the Court of Special Appeals rejected the defendant’s assertion that the proper standard of proof in retaliation claims is a “but for” test.  In Magee, the court clarified an earlier decision that suggested a “but for” test for the plaintiff’s burden of proof.  The court stated that even when an employer takes into account both legitimate and illegitimate factors in making an employment decision, that decision can still be said to be “because of sex” or another protected class. 

The Court of Special Appeals also reversed the circuit court’s dismissal of Gasper’s negligent hiring and retention claim and held that it was not preempted by Maryland’s anti-discrimination statutes.  The court concluded that Gasper was seeking recovery in tort based on her attempts to report assault and battery, in addition to seeking recovery for retaliation based on the anti-discrimination statutes.  The court reasoned that the tort claim based on the assault and battery was grounded in public policy and exists apart from the anti-discrimination statutes.  The court also rejected defendant’s argument that the negligent hiring and retention claim was preempted by the state’s workers’ compensation statute as the defendant had not provided any authority in support of its contention.

Contributed by Claudia L. Guzman

The bill applies to anyone who employs a domestic worker for more than 20 hours a week during any 30 day period.  The bill excludes certain types of domestic workers, such as Au Pairs, from coverage.  If covered, the employer must offer the worker an employment contract setting forth the terms and conditions of employment including days and hours of work, wages, paid time off, unpaid time off, frequency of payment of wages, deductions from wages, eligibility and calculation of overtime wages, duties, living accommodations (if any), meals (if any), breaks, required notice before termination, severance wages (if any), the period of the contract, reimbursement of expenses, and notice of rights under State law.

“Employers” subject to the law would be advised to study its provisions in more detail.

Under the Act, only employers that provide leave with pay to their employees are required to comply.  Employers who do not provide paid leave as an employee benefit are not required to implement paid leave programs to comply with the law. To the extent that an employee has more than one form of paid leave available, the employee has the right to elect the type and amount of leave with pay to be used.  If possible, the new leave must comply with the terms of an employment policy or bargaining agreement. 

The Act includes an anti-retaliation provision, prohibiting employers from taking an adverse action, or threatening to take such action, against an employee who exercises rights under the Act or who complains about any violations of the Act or participates in an investigation or legal action arising out of such complaints.

While the Act does not affect any leave granted under the federal Family and Medical Leave Act, employers can expect to see many claims analogous to those brought under the FMLA brought under this Act such as what type of illness must the family member suffer to trigger coverage under the Flexible Leave Act, as well as notice and verification issues.

With the enactment of the Flexible Leave Act, Maryland employers should review their paid leave policies and inform their Human Resources employees about the Act.  Leave policies for Maryland employers should be updated to reflect that any form of accrued leave with pay can be taken for purposes of caring for an immediate family member who is ill.

Contributed by Michael K. Wilson

The most significant amendments to the law allow employees to bring lawsuits under the statute in state court after 180 days have elapsed since the filing of a charge of discrimination.  Claimants may seek compensatory and punitive damages in addition to back pay.  The law contains damage caps similar to those under federal law (Title VII) but does allow to uncapped back pay awards.  Again, similar to Title VII, the law covers employers with over fifteen employees.

Maryland employers should make sure that their policies are up to date on the applicable protected classifications under both state and local law.  The changes to the law also make 2008 a good time to conduct refresher training for managers on the discrimination laws and your company’s anti-discrimination and anti-harassment policies.  (If you don’t have one in place, start on one now!)

Note that in order for an employer to deny payment of accrued leave benefits upon termination it must have in place a written policy to that effect and it must give notice of leave benefits at the time of hiring.  If the employer does not do so, the accrued leave benefits arguably should be paid upon termination as “wages” under the Maryland Wage Payment and Collection Law.

Hat tip to the Maryland Employment Law Blog.

UPDATE 5.14.2008 — PLEASE READ THIS POST FROM MAY 13, 2008, REGARDING THE NEW LAW IN MARYLAND DEALING WITH ACCRUED LEAVE.

The Maryland Guide to Wage Payment and Employment Standards now states:“When an employee has earned or accrued his or her leave in exchange for work, an employee has a right to be compensated for unused leave upon the termination of his or her employment regardless or the employer’s policy or language in the employee handbook.” 

This is a change from the previous Maryland Guide which made payment of unused vacation time dependent on the employer’s policy. 

The change in position was apparently brought about by an unpublished lower court decision that called the Maryland DOL’s previous position into question.  In Catapult Technology v. Paul Wolfe, No. 997 (Aug. 20, 2007) (unpublished), the Maryland Court of Special Appeals held that unused paid time off constitutes a “wage” under the Maryland Wage Payment and Collection Law, and thus must be paid to employees upon termination.  Catapult’s policy required employees to give two weeks notice of their intent to resign.  If they did not provide the two-weeks notice, under Catapult’s policy, employees forfeited their right to universal leave that had accrued.  “Universal leave” included paid time off for illness and vacation. 

Employees who resigned without giving the two-week notice, and therefore were not given leave pay, brought suit.  The court ruled in the employees’ favor, finding that because leave accrued based upon the number of hours worked, the leave was a “wage” that could not be withheld at termination. 

Due to Catapult, and the Maryland DOL’s resulting change in position, Maryland employers now must pay unused accrued vacation to employees upon termination, regardless of any policy to the contrary.  “Use it or lose it” policies that typically require employees to use or forfeit accrued paid leave by the end of year are also brought into question due to the Maryland DOL’s change of position.  Although neither Catapult nor the Maryland Guide expressly address “use it or lose it” policies, based on the rationale underlying Catapult they are unlikely to survive in Maryland.

(Contributed by Michael K. Wilson, Esq.)

The controversy over the Montgomery County ordinance highlights another side to the evolving definition of “protected classes.”  That is the question of how far we go in defining those who are legally protected from employment discrimination (and those who are not).  If everyone falls within a protected class, then is there simply a universal wrongful discharge claim?  If we go beyond immutable characteristics (such as gender or race) in defining “protected classes” — for example, the District of Columbia Human Rights Act prohibits discrimination in employment based on “personal appearance” (including manner and style of dress) – then what is the basis for choosing those who fall with a “protected class”? 

Difficult questions, but ones that may be debated in the U.S. Senate when the Employment Non-Discrimination Act is considered.