Maryland Labor Laws for HR Compliance – 2023

maryland labor laws MD

Note: This article only covers private sector labor laws.

Labor laws are constantly changing, and if you’re doing business in Maryland, it makes sense to stay on top of what’s changing and what now applies to your organization. Being unaware of what you should be complying with is setting yourself up for a world of pain—think lawsuits, fees, and a tarnished reputation. Since you might operate in Maryland or are thinking of expanding there, it’s time we provide guidance about the labor laws specific to the Old Line State.

Minimum Wage in Maryland

As of January 1, 2023, Maryland has raised its minimum wage to $13.25 per hour for companies with 15 or more employees and $12.80 for companies with fewer employees (full or part-time). Tipped employees are still excluded; they must be paid $3.63 per hour, and the total of wage and tips must be at least equal what they would have made at the state minimum wage. Restaurants must offer evidence of compliance of this rule with a written or electronic statement of wages plus tips per pay period, for each tipped employee. There are other minimum wage exemptions, which can be found at the Maryland Department of Labor, but we will summarize it here so you don’t have to hunt around for the information:

Minimum Wage and Overtime Exemptions

  • Immediate family member of the employer
  • Certain agricultural employees
  • Executives, administrative, and professional employees
  • Volunteers for educational, charitable, religious, and non-profit organizations
  • Employees under 16 working less than 20 hours per week
  • Outside salespersons
  • Commissioned employees
  • Employees enrolled as a trainee as part of a public school special education program
  • Non-administrative employees of organized camps
  • Certain establishments selling food and drink for consumption on the premises grossing less than $400,000 annually
  • Drive-in theaters
  • Establishments engaged in the first canning, packing or freezing of fruits, vegetables, poultry, or seafood

Note on minimum wage for minors

Employees who are under 18 years old are paid at a minimum wage rate of 85% of the state minimum wage, which as of 2023 is $11.27 when you round up to the nearest cent.

With the Fair Wage Act of 2023 signed into law, the state minimum wage will hit $15.00 per hour on January 1, 2024 for employers of all employer headcount levels.

Montgomery County

In cases in which the local minimum wage is higher than the state, the local wage will prevail, which is the case in Montgomery County.

Montgomery County – Effective July 1, 2023, Montgomery County Code Section 27-68 mandates changes to the county minimum wage, and a gradual increase for some employers. Here are the minimum wage rules:

Effective DateLarge Employer**Mid-sized Employer***Small Employer****Tipped Employee
July 1, 2023$16.70$15.00$14.50$4.00+ tip = $15.00
January 1, 2024$16.70$15.00*$15.00*Same
July 1, 2024Prior year + CPI-W$15.00 + CPI-W + up to 1% until equal to large employers$15.00Same
July 1, 2025Prior year + CPI-WPrior year + CPI-W + up to 1% until equal to large employers$15.00 + CPI-W + up to 1% until equal to large employersSame
July 1, 2026 +Prior year + CPI-WPrior year + CPI-W + up to 1% until equal to large employersPrior year + CPI-W + up to 1% until equal to large employersSame
All $ stated in dollars per hour
* State mandate, Fair Wage Act of 2023
** A large employer employs greater than 50 employees.
*** A mid-sized employer employs between 11 to 50 employees.
**** A small employer employs 10 or fewer employees.

Montgomery County has opted to increase minimum wage annually on July 1st by the average rate of increase in the prior year’s Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). You can forecast how much the county is going to increase the minimum wage by going to the BLS database and doing some simple math. You take the current minimum wage x (1+(prior year CPI-W rate)). But:

  • Large employers: The CPI-W increase is rounded to nearest $.05.
  • Mid-size employers: If the dollar amount of the rate increase is less than $.50, AND the new minimum wage is not equal to the minimum wage for large employers, an additional 1%, rounded to nearest $.05.
  • Small employers: Same as Mid-size employers, but deferred for a full year.

Montgomery had to make it hard for us, right? The bottom line is, if you’re paying your folks less than the prevailing minimum wage, it’s time for a compensation review to get back in compliance.

Overtime

Maryland follows the federal Fair Labor Standards Act (FLSA) when it comes to overtime pay. Your non-exempt employees are owed 1.5 times their standard rate for any hours worked beyond 40 in a 7-day workweek. Exemptions exist but are very specific. Leave hours, including vacation, sick time, holiday, etc., are not counted toward the 40 hours in a week for overtime purposes. To reiterate – only worked hours count towards overtime. Exemptions are:

  • The hours before required before overtime is owed to employees is extended from 40 hours to 60 hours for agricultural workers.
  • Taxicab drivers are exempt from overtime.
  • Certain employees selling/servicing automobiles, farm equipment, trailers, or trucks are exempt.
  • Non-profit concert promoter, theater, music festival, music pavilion, or theatrical show are exempt.
  • Employers subject to certain railroad requirements of the U.S. Dept. of Transportation, the Federal Motor Carrier Act, and the Interstate Commerce Commission are exempt.
  • Seasonal amusement and recreational establishments that meet certain criteria are exempt.

Safe and Sick Leave

The Maryland Healthy Working Families Act (MHWFA or “Sick and Safe Leave”) mandates that employers with 15 or more employees provide up to 40 hours of paid sick leave per year. The law requires employers to provide earned sick and safe leave to all employees with primary work location in Maryland. For companies with fewer than 15 employees, you’re still required to offer unpaid sick leave.

Montgomery County’s Sick Leave Law was enacted years prior to the state law, and now residents and employers must adhere to both laws. The state law prohibits Counties from enacting their own sick- and safe-leave laws after January 1, 2017., but the Montgomery law was excluded, meaning, in this county both the state and county law are in force.

Details of the Maryland Healthy Working Families Act

Eligibility

  • Employees ages 18 and older who regularly work 12 or more hours a week are eligible for leave under the act.

Time Off Accrual

  • Accrual Start Date: Employees start earning parental leave either when they’re hired or on February 11, 2018, whichever is later.
  • Accrual Rate: Employees earn one hour of leave for every 30 hours worked.
  • Accrual Limit: Employees may accrue one hour of paid sick and safe leave for every 30 worked—up to 40 hours a year.
  • Maximum Carry Over: Employees may carry over up to 40 hours of accrued leave from one year to the next.
  • Maximum Accrual Balance: Employees can have a maximum of 64 hours saved up in any given year.
  • Accrual Period Options: Rather than periodic accrual, businesses may opt to provide 40 hours of leave as a lump sum at the start of a calendar year.

When Employees Can Use Leave

  • For their own or a family member’s medical needs, including doctor visits.
  • To care for a sick family member.
  • For parental leave when a child is born, or for the placement of a child with the employee for adoption or foster care.
  • If they or a family member are dealing with domestic violence, sexual assault, or stalking issues.
  • Employees may need to provide reason for the absence, similar to FMLA leave.
  • Employers are only required to allow employees to use the sick leave after the 106th calendar day (after 15 weeks) of employment. Think of this as an introductory period for the employee, or a mechanism to prevent an unscrupulous employee from taking advantage of employers.

Family Definition

  • Includes spouse, children, parents, grandparents, siblings, or anyone who acted as a parent (or stood in as parent, loco parentis) to the employee when they were a minor.

Employer Obligations

  • If you have 15 or more employees, you must provide paid parental leave. If you have fewer, the leave can be unpaid.
  • Employers are required to notify employees that they’re entitled to the sick and safe leave, as well as the rate of accrual.
  • If an employee is separated for less than 37 weeks and returns to work for the employer, the employer has to reinstate any earned but unused sick and safe leave even if it’s unpaid leave.

Legal Requirements

  • Every pay period, employers are now required to provide individual reports in the form of written statements to their employees that detail the amount of earned leave available for use.
  • Employees are not to be disciplined for using leave in accordance with the law.
  • Employees who feel that their rights have been violated may file a complaint by reaching out to the Commissioner of Labor and Industry’s office.
  • Employers are required to keep three years of records of sick leave.

Check out the Maryland Department of Labor FAQ doc for a Q & A on this law and it’s application in real life.

Flexible Leave Act

The Flexible Leave Act, section 3-802 of the Labor and Employment Article, allows employees of employers with 15 or more employees to use accrued paid leave to care for an immediate family member who is ill or for bereavement leave upon the death of an immediate family member.

  • Immediate family member is defined as a child, spouse, or parent.
  • Leave with pay is considered time away from work for which an employee is paid and includes sick leave, vacation time, and compensatory time.
  • Employees can only use leave with pay that has been earned.
  • Employees who earn more than one type of leave with pay may elect the type and amount of leave to use.
  • Employees who use leave with pay under this law are required to comply with the terms of any collective bargaining agreement or employment policy.
  • The Flexible Leave Act prohibits employers from discriminating against employees who exercise their rights under this law.

The provisions of the Flexible Leave Act does not affect leave granted under the Federal Family and Medical Leave Act of 1993 (FMLA).

Breaks and Meal Periods

In Maryland, employers must provide employees under the age of 18 with a 30-minute break for every 5 hours of work. However, the state law doesn’t require breaks or meal periods for adult employees, but does have retail worker exception. It’s not mandated, but it’s a best practice. Happy, well-rested employees are more productive, right? Take note of the following requirements if you do allow breaks to be conditionally unpaid.

Note: If employers allow employees to exit the premises or workstation to take lunch breaks in excess of 20 minutes at a time, employers do not have to pay for that lunch break duration so long as they are not required to perform any work. Breaks less than 20 minutes are to be paid, as is extended breaks in which interruptions in the break to perform work occur.

The Healthy Retail Employee Act (HREA)

While in general, employers don’t have a Maryland lunch break mandate, retail workers have the HREA. The HREA requires employers to provide certain retail employees with non-working shift breaks. The law applies to employers who have 50 or more retail employees for each working day in the last 20 or more calendar weeks.

The HREA requires employers to provide the following breaks:

  • A 15-minute break for employees who work 4 to 6 consecutive hours.
  • A 30-minute break for employees who work 6 or more consecutive hours.
  • An additional 15-minute break for every additional 4 consecutive hours that an employee works after 8 hours in a single shift.
  • The breaks must be non-working, meaning that the employee is not allowed to work during the break. The breaks must also be paid, unless the employee is covered by a collective bargaining agreement or other employment policy that provides for unpaid breaks.

Regarding health insurance, paid time off, holidays, and other traditional employee benefits, no specific state standard exists for private sector employers in Maryland. Employees should comply with federal rules, and develop their own organizational policies and agreement terms. The only exception is a religious day of rest for retail workers, provided to them upon written request and employer approval.

Anti-Discrimination Laws

Discrimination laws in Maryland go beyond federal mandates. The Maryland Fair Employment Practices Act (FEPA) protects more categories than Title VII of the Civil Rights Act of 1964, prohibiting discrimination based on race, color, religion, ancestry or national origin, sex, age, marital status, sexual orientation, gender identity, or disability.

The FEPA defines discrimination as any action that has the purpose or effect of discriminating against someone on the basis of a protected category. This includes actions such as:

  • Refusing to hire someone
  • Firing someone
  • Demoting someone
  • Denying someone a promotion
  • Paying someone less than someone else for doing the same work (“apples to apples”)
  • Creating a hostile work environment

The FEPA also prohibits retaliation against someone who has opposed discrimination or filed a complaint of discrimination.

Employees can file a complaint with the Maryland Commission on Civil Rights (MCCR) within 300 days of the alleged incident. The MCCR is a state agency that enforces the anti-discrimination laws in Maryland, including housing discrimination.

Penalty for Non-compliance: The MCCR will investigate employee complaints and may hold a hearing. If the MCCR finds that the employee has been discriminated against, they can order the employer to take corrective action, such as providing back pay or reinstatement.

Employees can also file a lawsuit against the employer in court. However, it is important to note that the statute of limitations for filing a discrimination lawsuit in Maryland is 3 years. This means that employees must file their lawsuit within 3 years of the date of the alleged discrimination.

Workers’ Compensation

All Maryland employers must provide workers’ compensation insurance for their employees (from private insurers approved by the state), including part-time and temporary employees. The insurance covers medical expenses and a portion of lost wages for employees who become injured or ill due to their job.

  • Workers’ compensation insurance covers employees for injuries or illnesses that they sustained while they were working, regardless of fault.
  • Employees who are injured on the job are entitled to receive benefits, including medical expenses, lost wages, and death benefits.
  • Employers are responsible for filing a workers’ compensation claim with the Maryland Workers’ Compensation Commission (WCC) on behalf of their injured employees.
  • The WCC will investigate the claim and determine whether the employee is entitled to benefits.
  • If the employee is entitled to benefits, the employer’s insurance company will be responsible for paying them.

Here are some of the key things to keep in mind as an employer in Maryland:

  • You are required to provide workers’ compensation insurance to your employees.
  • You are responsible for filing a workers’ compensation claim on behalf of your injured employees.
  • You are not allowed to fire or retaliate against an employee who files a workers’ compensation claim.

Employee Termination

In Maryland, employment is generally “at will,” meaning either party can end the relationship at any time. However, certain exceptions apply. You can’t terminate an employee for discriminatory reasons, in retaliation for reporting harassment, or for filing a workers’ comp claim. Other important stipulations:

  • Employers are not required to give employees a reason for termination. However, they are encouraged to do so in order to avoid legal disputes.
  • If an employer terminates an employee without cause, the employer must provide the employee with at least two weeks’ notice of termination. The employee may waive this notice period, but the employer cannot force them to do so.
  • Employers must pay employees all wages earned up to the date of termination, regardless of the reason for termination. This includes vacation pay, sick leave, and any other accrued benefits. This pay is due on or before next regular check date on which the employee would have been paid had they not been terminated.
  • Employers may be required to pay severance pay to employees who are terminated, only if they were promised severance in company policy or employee agreement.
  • PTO is generally not required to be paid out. Unless otherwise stated in employee policies, unused sick leave and vacation is not required to be paid out upon termination.

Employee terminations can get ugly if not done properly. To stay compliant in the termination of an employee in Maryland:

  • Document the reasons for termination. This could include performance reviews, disciplinary records, or Performance Improvement Program documentation.
  • Be fair and consistent in your treatment of all employees.
  • Avoid making any statements to the employee which can be construed as discriminatory or retaliatory to the employee.
  • If the employee files a complaint with the Maryland Department of Labor, cooperate fully with the investigation.

Record-Keeping Requirements

Maryland Department of Labor mandates that employers keep payroll records for at least three years.

The specific records that you are required to keep include:

  • The name, address, race, gender, and occupation of each employee.
  • The rate of pay of each employee.
  • The amount that is paid each pay period to each employee.
  • The hours that each employee works each day and workweek.
  • Any deductions made from the employee’s wages.
  • Any tips received by the employee.
  • Any records of overtime hours worked.
  • Any records of breaks or meal periods provided to the employee.

Nothing in the Maryland recordkeeping requirements prevents employers from complying with federal EEO recordkeeping requirements.

Penalty for Non-compliance: The recordkeeping Maryland labor laws are enforced by the Maryland Department of Labor. If you are found to be in violation of these laws, you could be subject to fines or other penalties.

Maryland Labor Law Poster Compliance

In addition to the Federal posters for compliance that you would need to display in a conspicuous location in your offices, these posters must also be displayed:


Final Thoughts: Stay Informed, Stay Ahead

Maryland labor laws can be a maze. But they’re also the backbone of ethical and compliant business practices. Stay in the know and put a solid labor compliance program in place, and you’ll make your work much easier over time.

This is just a taste of the many labor laws affecting Maryland employers. Laws can change, and local ordinances may add another layer of compliance. Keep yourself updated, consult with legal experts, and most importantly, align your policies to reflect both the letter and the spirit of these laws.

Till next time, navigate the maze wisely, and keep that business thriving.

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Cody Bess