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Maryland’s newly-enacted Commercial Nondiscrimination Policy provides that the State should not do business with an entity found to have discriminated against vendors, suppliers, subcontractors or commercial customers on the basis of race, color, ancestry or national origin, sex, age, marital status, sexual orientation or disability. The Act also prohibits retaliation against those involved with the filing or investigation of a charge of commercial discrimination. The Act provides penalties including debarment for up to three years; rescission, suspension, or termination of a current State contract; exercise of other rights or remedies available under a State contract; and referral for criminal prosecution. Accordingly, every business which does – or may seek to do – business with the State should be familiar with and prepared for this Act prior to its effective date of October 1, 2006.

The law assigns investigatory authority to the Maryland Commission on Human Relations (“MCHR”). The MCHR has long investigated charges of discrimination in employment, housing, and public accommodations. Under the Act, after completing its investigation of a charge of discrimination in commercial activities, the MCHR issues a finding that the charge is: (1) “sustained”; (2) “not sustained”; or (3) frivolously filed. A commercial discrimination charge can be settled or withdrawn prior to a decision by the MCHR. The MCHR’s finding will also note whether additional investigation is warranted, and recommend what, if any, sanctions or remedies should be imposed. The MCHR’s findings are subject to contested case hearings before an Administrative Law Judge, whose decision is in turn subject to judicial review. The Act provides that a charge of discrimination will not affect any State bid process or contract before a violation is established by a final adjudication.

The Act sets forth the following six factors for the MCHR to consider: (1) whether the respondent had an intent to discriminate; (2) whether there was a pattern and practice of discrimination; (3) any actions taken by the respondent to remedy the alleged discrimination; (4)the effectiveness of any prior attempts by the respondent to remedy the discrimination; (5) whether the business has procured goods or services from persons or entities from the complainant’s protected class to an extent demonstrating that the respondent has not discriminated in the overall context of its business; and (6) any other relevant evidence.

Businesses should also be aware that the Act requires that a nondiscrimination clause and certification be included in state contracts, bids and subcontracts. Although the State will insert appropriate language into prime contracts, contractors must be sure to include the applicable language in its subcontracts and bid proposals.

Any person against whom a business has discriminated or retaliated can bring a charge with the MCHR against state contractors for such alleged discrimination or retaliation which occurred within the preceding four years.

The four year limitations period may make defending a charge more difficult and expensive. Where charges are brought well after the alleged incident, businesses will often find that memories have faded, former employee witnesses have left (sometimes under unfavorable circumstances), and documents either do not exist or have been discarded.

The Act does contain provisions designed to discourage knowingly false or frivolous charges. When a complainant is found to have brought a knowingly false or frivolous charge, the MCHR may refuse to investigate any subsequent charges by that party for up to three years, and the complainant may also be subject to sanctions, attorneys’ fees and costs, and debarment for up to three years.

As with many new statutes, the language of the Act leaves open certain questions, including whether it applies to discrimination or retaliation which occurred on or before its October 1, 2006 enactment date. This and other open questions may be addressed in regulations (which have not yet been issued) or by judicial decisions. Interestingly, MCHR estimated that enactment of the Act will necessitate the addition of seven new positions - three attorneys, two investigators, one management analyst and a legal secretary. However, the Maryland Department of Legislative Services believes that in light of the experience of other jurisdictions that have enacted similar laws, “MCHR should not experience a significant increase in its caseload.” Time will tell which view of the law’s impact is correct.

As is so often the case in life and in business, an ounce of prevention is worth pounds of cure. Nowhere is this truer than in litigation avoidance. State contractors should act now to update anti-discrimination policies, provide appropriate employee training, and set up or review procedures for documentation. While no amount of diligence can guarantee that charges will not be filed, time spent up front can both reduce the likelihood of claims and increase the chances of successfully defending against claims that are filed.