Non-Compete Agreements in Maryland: Are Covenants Not to Compete Enforceable?

Often employee agreements and business agreements include clauses which are referred to as Non-Compete Agreements (also known as a Covenants Not To Compete). Covenants Not To Compete are clauses in contracts that on-their-face restrict the ability of an employee, individual, or company to work in certain fields or areas after the employment or business relationship ends. Employers will often place these non-compete clauses into agreements with new employees or contractors to ensure that the individual does not end up competing against the employer after leaving their job. While Non-Compete Agreements have been sometimes found unenforceable by Maryland courts, the Maryland Court of Appeals has asserted consistently since 1908, that “lawful competition must be sustained and encouraged by the law.” (Knickerbocker Ice Co. of Baltimore City v. Gardiner Dairy Co.).

Specifically, the Maryland Court of Appeals has established a general rule regarding the enforceability of Covenants Not To Compete. The Maryland high court has stated that “if … supported by adequate consideration and is ancillary to the employment contract, an employee’s agreement not to compete with his employer will be upheld ‘if the restraint is 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.'” (Becker v. Bailey). Through this standard, Maryland courts have the ability to determine whether a specific language restricting competition can be enforced by a court.

Since the Maryland Court of Appeals 1973 ruling in Becker v. Bailey, Maryland courts has regularly evaluated each specific covenant not to compete to determine whether each covenant is enforceable under constantly-refined standards established by the Court of Appeals and Court of Special Appeals. (Simko, Inc. v. Graymar Co.). The Court of Appeals has also ruled that the threat of discharge to induce an employee to sign a covenant not to compete may “constitute duress,” and such duress can – in certain circumstances – negate the enforcement of a non-compete agreement. (Simko, Inc. v. Graymar Co.).

Bottom line, in Maryland, Non-Compete Agreements/Covenants Not To Compete can be held enforceable under certain circumstances.  However, each agreement must be specifically evaluated to ensure that the specific non-compete language meets the Maryland standards. A business attorney can assist individuals and companies through the Maryland caselaw which helps guide the enforceability of such Non-Compete Agreements.

Adam Van Grack and Longman & Van Grack’s other litigation attorneys regularly (1) handle different types business law cases including matters involving non-compete agreements and (2) draft enforceable non-compete agreements for business clients. If you would like to discuss a business legal matter with a business attorney, call Longman & Van Grack’s attorneys today at (301) 291-5027 to schedule a consultation in our Bethesda or Rockville, Maryland offices. You can also reach Mr. Van Grack directly at (301) 291-7156 to discuss any aspect of non-compete agreements in Maryland or Washington, DC