The Maryland General Assembly opened its 2019 session on January 9th. During this year's session, 2,500 bills were filed and a total of 867 bills were passed, before the session concluded on April 8th. As is always the case, some bills were more significant than others, and a few of them certainly became the subject of heated political debates.
Labor and employee issues are often at the forefront of the minds of business owners. Understanding how these laws could impact your business and your obligations to your employees is critical. Below are some of the most significant new laws. As you review them, please do consider the impact that some of these may have on existing relationships and employment documentation used by you, including your employment handbook.
Minimum Wage (HB 166/SB280)
Effective June 1st, this bill increases the state minimum wage rate for employers with 15 or more employees; full phase in of the $15.00/hour rates will occur on January 1, 2025. For employers with 14 or fewer employees, full phase-in will not occur until July 1, 2026. The bill does not change the tip credit, nor does it tie future increases to inflation.The bill does allow businesses to pay younger workers (those less than 18 years of age) and agricultural workers less than the minimum wage. In addition, the law does not preclude local jurisdictions’ from establishing higher minimum wage rates, should they wish to do so.
Use of Criminal History (HB 22)
With this bill, certain departments of the State cannot deny an occupational license or certification of an applicant solely based on the applicant being previously convicted of a crime if a period of 7 years or more has passed since the applicant’s conviction and the applicant has not been charged with another crime (other than a traffic violation). The bill does not apply to a conviction of a crime of violence or crime where the individual is a registered sex offender. The bill would be effective October 1st.
Gender Diversity in the Boardroom (HB1116/SB911)
Beginning October 1st, this bill requires tax-exempt domestic non-stock corporations or domestic stock corporations with a budget exceeding $5 million to report the number of female board members and total number of directors when filing a personal property report with SDAT. This bill will be effective for a period of 10 years ending September 30th of 2029.
Non-Compete and Conflict of Interest Clauses (SB328)
This bill provides that a non-compete clause or conflict of interest clause in an employment contract or similar document, where an employee earns equal to or less than $15.00/hour or $31,200 annually, will be null and void as being against public policy. This prohibition applies regardless of whether or not the agreement was entered into in the State of Maryland or note. Such prohibitions would not apply, however, to a contract protecting a client list or company proprietary information. This bill would be effective October 1st.
A handful of interesting bills related to real estate were passed this year, touching on a number of issues that impact homeowners, real property developers, and business owners.
State and Local Forest Conservation Funds (SB234/HB272)
This bill tightens the Maryland Forest Conservation Act by aiming to ensure that replacement trees are planted to offset forest loss. Local governments are currently authorized to create fee-in-lieu programs that developers can pay into instead of replanting trees lost in the proposed development. However, until now, local governments were not legally obligated to use the funds collected to reforest. This new legislation obligates local governments to set up mitigation or reforestation plans and to use any fee-in-lieu funds collected to mitigate or reforest an equal number of acres for which the money is collected.
State Real Estate Commission – Real Estate Brokerage Relationships, Continuing Education and Disclosures (SB807/HB1228)
While real estate brokers have an obligation to protect confidential information disclosed to them by a client, this duty of confidentiality has until now not extended to prospective clients who may disclose sensitive information to the broker in the course of deciding whether to engage the broker. This bill prohibits individuals licensed by the State Real Estate Commission from disclosing confidential information obtained from a prospective client in anticipation of forming a brokerage relationship, unless the prospective client consents to the disclosure in writing. The bill also clarifies the definition of dual agency.
Short-Term Rentals Must Collect Sale and Use Tax (HB884/SB533)
Beginning on June 1, 2019, short-term rentals in Maryland through platforms such as Airbnb must now collect and remit State sales and use tax. The owners of Maryland short-term rental properties listed through online booking platforms such as Airbnb, VRBO, Booking.com, HomeAway, and others need to be aware of a significant new change to the tax regulations affecting these properties. Until now, these short-term rentals have been exempt from Maryland sales and use tax, giving them a significant advantage over traditional hotels and bed and breakfasts, which are subject to state sales and use tax as well as local lodging taxes. In an attempt to level the playing field, at least as far as sales and use tax is concerned, Maryland legislators have now closed this loophole. Beginning on June 1, 2019, the owners of short-term rental properties in Maryland must now collect the 6% Maryland sales and use tax at the time of booking and remit it to the state. The new legislation, which is expected to significantly increase tax revenues for the state, follows in the footsteps of Montgomery County and Baltimore City, which already collect local rental and hotel taxes on short term rentals. The process for collecting and remitting sales and use taxes to the Maryland State Department of Assessments and Taxation (SDAT) will vary depending on the platform property owners use to make bookings. Airbnb, for example, already has agreements with a number of states to collect and remit hotel and lodging taxes on behalf its lodging operators. Property owners should check the terms of service for each of the booking sites they use and familiarize themselves with the process for collecting taxes for that particular site. In some cases, property owners, may need to manually collect taxes and remit them to SDAT themselves.
Residential Real Estate Transactions – Escrow Agents (HB222)
Escrow agents holding money in escrow in a residential real estate transaction will be required to have a written escrow agreement between the escrow agent, the purchaser and the seller as of October 1st. The escrow agreement must contain certain required terms. This requirement will not apply to banks, home builders engaged in the initial sale of residential real estate, or real estate brokers.
ESTATES, TRUSTS, AND GUARDIANSHIP
The areas of estate and tax planning, probate, and trust administration did not escape the attention of our lawmakers. A total of nine bills passed, a few of which will have a substantial impact on estate planning going forward.
Elective Share of Surviving Spouse (SB192/HB99)
This bill was passed because the General Assembly was concerned that a surviving spouse should be reasonably provided for during that spouse’s remaining lifetime; so, it was reasoned, the first spouse to die should not be allowed to totally disinherit the surviving spouse without the consent of that surviving spouse. Under the new law, therefore, the “taxable estate” of the first spouse to die is the estate that will be made available for division. The taxable estate includes just about everything a deceased owned or had any type of ownership interest. There will be no hiding of assets. This is a substantial shift from prior law which generally only permitted the surviving spouse to take 33.33% of the probate estate, and did not account for non-probate assets (which commonly include life insurance and retirement accounts). This bill will not be effective until October 1, 2020.
Execution Of Wills Outside Of State (SB212)
This is important because it is a harbinger of things to come. The initial concern that the General Assembly wanted to address was the proliferation of online services that offered people the ability to prepare and execute Wills from the comfort of their living room, even though the provider was in Nevada or some other state. There are numerous practical, legal, and ethical concerns about this arrangement; however, this practice is a sign of things to come. Fortunately, there is a national organization, the Uniform Law Commission, which is working hard on a model law that will suggest how this issue can ethically be addressed. The bill that was just passed simply builds a bridge to a more comprehensive approach to managing internet wills that will be submitted in the future.
Share of Intestate Estate Inherited by Spouse (SB317)
When a person dies without a Will, that person dies “intestate.” This just means that the distribution provisions found in Maryland will be applied to the deceased’s estate. Current law leaves a deceased person’s surviving spouse $40,000, plus ½ of the rest of the decedent’s estate. The decedent’s parents inherit the remaining ½, if the decedent had no surviving children. The new law modifies the amount inherited by the decedent’s parents based on the number of years the decedent and the surviving spouse were married. If they were married for less than 5 years, the division of the estate as described above remains in effect. If they were married for more than 5 years, the surviving spouse inherits the entire estate. This only applies if the decedent has no surviving children. If there are surviving children, under Maryland law the children and the surviving spouse divide the estate.
Unlike years past, this year was a light year when it came to bills that passed that impact community associations.
Real Property – Homeowner Associations – Number of Declarant Votes (SB305)
Senate Bill 305, amended Section 11B-111.7 of the Homeowners Association Act and provides that, beginning on the date on which all lots that may be part of a development have been subdivided and recorded, when voting on homeowners association matters, a declarant is entitled to one vote for each lot within the development that has been subdivided and recorded and has not been sold to members of the public. Before the date on which all lots that may be part of the development have been subdivided and recorded, when voting on homeowner association matters, a declarant is entitled to the number of votes set forth in the Governing Documents of the homeowners association.
In the realm of family law, many bills setting forth revisions and updates to current laws were proposed this session, although most of these did not pass and were indefinitely tabled. Considering the trend over the past several years to make it easier to obtain an absolute divorce based on no-fault grounds, it seems likely that bills such as HB402- Grounds for Absolute Divorce will be reconsidered or proposed with variations next session..
Child Support – Extraordinary Medical Expenses (HB0742)
House Bill 742 modified the definition of an “extraordinary medical expense” under the Maryland child support guidelines, which expenses are to be added to a parent’s basic child support obligation and divided between the parents in proportion to their respective incomes. The definition now includes uninsured costs for medical treatment in excess of $250 in any calendar year, whereas the prior definition referred to expenses over $100 for a single illness or condition. The definition was also expanded to include vision care.
HEALTH CARE LAW
Health care law is a hot topic, especially in the area of immunizations and patient’s rights. See what changes are on the horizon.
Vaccination Reporting Requirements – ImmuNet (HB 316)
This bill requires providers to report vaccinations administered to the Maryland Department of Health through its immunization and reminder registry, ImmuNet, to improve timely and appropriate delivery of immunizations. ImmuNet data creates a state-wide immunization history for individuals, facilitates determination of geographic or population groups that may be underimmunized, and monitors the safety of vaccines. Patients and parents can elect to opt out of the disclosure of confidential information collected by ImmuNet. To ensure prioritization of patient confidentiality, the bill subjects’ users of the ImmuNet data who knowingly disclose confidential data to a fine up to $1,000 for the first offense and not more than $5,000 for each additional disclosure.
Health Care Malpractice Qualified Expert-Qualifications (SB 773)
Medical experts play a central and critical role in medical malpractice cases. So, as part of an effort to assure that hired experts are qualified and objective, in the 1980s the Maryland legislature put in place the 20% Rule – a health care practitioner hired to provide expert witness testimony may not devote more than 20% of his or her professional time during the past year to activities that involve testimony in personal injury cases. With the passage of SB 773, as a compromise to a push from the trial lawyers to seek to repeal the 20% Rule altogether, the legislature amended the Rule to increase the time devoted to expert witness activities to 25%. The bill also clarifies that the time period used to compute the 25% is the 12 month period preceding the date when the claim was filed, and that once an expert meets this criterion they remain qualified during the pendency of the claim.
Hospitals – Patient’s Bill of Rights (HB 145)
This bill, effective October 1, 2019 essentially mirrors existing protections provided under Section 1557 of Affordable Care Act, requiring hospitals to ensure that patients with limited English proficiency are informed of their right to be provided interpretative services that facilitate their full participation and understanding of any hospital services discussed during their stay.
Maryland Medical Assistance Program – Telemedicine-Psychiatric Nurse Practitioners and Psychiatrists (HB 605)
This bill authorizes the Maryland Department of Health to add psychiatric nurse practitioners who provide telemedicine services to the list of eligible Medicaid providers who may receive reimbursement for such services. Psychiatric Nurse Practitioners will join primary care providers and psychiatrists as eligible providers for reimbursement for services provided to patients located in a home or community-based setting.
If you have any questions about the specific requirements of any of these potential new laws, or any other legal or regulatory changes that may take effect later this year, please contact an attorney at our firm so we can assist you.