What Happened:
Two big rule changes were announced on April 23, 2024 from two federal agencies, the Federal Trade Commission (FTC) and the Department of Labor (DOL), that will impact employers in two key areas – non-competes and overtime.
First, the FTC voted on a final rule that effectively bans the use of all non-compete agreements with few limited exceptions. The final rule is scheduled to go into effect 120 days after it is published in the Federal Register. A lawsuit was filed in Texas challenging the rule on April 24, 2024, the day after it was announced.
Second, the DOL announced that it has increased the Fair Labor Standards Act’s (FLSA’s) annual salary-level threshold from $35,568 to $58,656 as of Jan. 1, 2025, for white-collar exemptions to overtime requirements. This change takes effect with an incremental increase starting July 1, 2024, when the salary threshold will increase to $43,888. Employees earning less than the salary-level threshold will be eligible for overtime. In addition, starting July 1, 2027, DOL will automatically increase the overtime threshold every three years.
Why You Need To Know About This:
Both the FTC Rule and the DOL salary threshold increase directly impact employers. Non-compliance with the DOL salary threshold increase will result in substantial regulatory penalties and exposure to litigation. The FTC non-compete rule is being challenged presently and is not yet effective. However, the FTC rule reflects the current shift in public policy away from non-competes, which is a trend that has been on the rise in certain states for some time. An employer should be prepared to protect its confidential business information, trade secrets and legitimate business interests through other tools, such as non-disclosure agreements.
What You Should Do:
Companies should work internally to perform a workforce audit to determine the impact on both wages paid and protection of the company’s legitimate business interests as a result of the DOL and FTC rules. In addition, companies should stay vigilant as the FTC rule is challenged in litigation. Employers should work diligently with counsel in reviewing current employment agreements, non-disclosures, and non-competes. Employers should also prepare for increased oversight for hours worked by salaried employees that fall below the new threshold.
The HLS Employment Group will be hosting a virtual Employment Round Table on Tuesday, April 30th at 8:30 AM. Please email Asenath Charles at charles@hylandlevin.com, to receive the link and participate in this round table discussion.
