FTC Makes Big Move to Block Noncompetes
Noncompete agreements have been a common tool in employment relationships, restricting employees from working for competitors or starting their own competing ventures after leaving a company. However, yesterday the Federal Trade Commission (FTC) issued a final rule that bans noncompete agreements for most workers, marking a significant shift in employment practices. Lawsuits have already been filed challenging this sweeping change, and there’s still a possibility that a court could block or delay the effective date.
Here’s a summary of what you need to know about the new rule:
- Ban on New Noncompetes: The rule prohibits employers from making new noncompete agreements with any workers, including senior executives, after the rule’s effective date.
- Existing Noncompetes: For most workers, existing noncompetes will not be enforceable after the rule’s effective date. However, existing noncompetes with senior executives can remain in place.
- Definition of Senior Executives: The rule defines “senior executives” as workers earning more than $151,164 annually who are in a policy-making position.
- Effective Date: The rule is effective 120 days following publication in the Federal Register, which should happen by the end of the week.
What Employers Need to Think About Now:
- Review Employment Contracts – It’s essential to review your current employment contracts and policies to ensure compliance with the new rule.
- Notify Employees – Employers will need to inform workers who have existing noncompetes (other than senior executives) that these agreements will no longer be enforced.
- Adjust Business Practices – Think about how your business practices need to change to align with the new rule, which may include developing alternative methods for protecting business interests.
- Identify Opportunities – your pool of potential job candidates may increase if competitors can no longer enforce existing noncompete agreements.
As an employer, staying informed and taking proactive steps to comply with this new regulation is crucial. You should consult with your legal counsel for any questions about this new rule. Harpst Becker’s attorneys are available to field questions and address your concerns.
DOL Raising Salary Thresholds for Exempt Employees
In other news yesterday, the U.S. Department of Labor (DOL) finalized a rule that significantly increases the salary threshold for certain exemptions under the Fair Labor Standards Act (FLSA). This change will affect the commonly used executive, administrative, and professional (EAP) exemptions, which are often referred to as the “white-collar” exemptions. As with the FTC rule, we anticipate legal challenges, and a court could delay the rule’s effective date.
Key Points of the New Rule:
- The salary threshold for white-collar exemptions will increase from $684 per week ($35,568 annually) to $1,128 per week ($58,656 annually) by January 1, 2025.
- This change represents a more than 50% increase from the previous threshold.
- The rule is implemented in two phases: the first increase to $844 per week ($43,888 annually) will take effect on July 1, 2024, followed by the second increase to $1,128 per week ($58,656 annually) on January 1, 2025.
- For highly compensated employees, the minimum salary threshold will rise to $132,964 on July 1, 2024, and then to $151,164 on January 1, 2025.
Action Steps for Employers:
- Review salaries of exempt employees and identify those who make less than $43,888 annually and less than $58,656 annually.
- Be prepared to increase salaries by July 1, 2024, for those who make less than $43,888 annually and again by January 1, 2025, for any exempt employee who is below the $58,656 annual salary level.
- If you choose not to make these salary increases, the alternative would be to transition the affected employees to nonexempt status (eligible for overtime).
Employers can get ahead of these deadlines by starting preparations now to ensure compliance with the new salary thresholds when (and if) they go into effect. For further details and guidance, please consult with your legal counsel.