May 10, 2024

Labor Law Update May 2024: Non-Compete and Overtime Rules

Leaders not only know the way forward, they also show the way forward. As the leading employment firm focused on helping Clients and Candidates emerge from the pack, the team at Emerge prioritizes staying informed of the entire labor landscape in order to identify the best path forward for our partners. 

Recently, two significant updates in labor rules were handed down from the federal government that employers and HR professionals need to understand: new rules on non-compete agreements and changes to overtime eligibility. 

Both updates are going to create ripples across our industry, and we will continue to keep our Clients, Candidates and partners on the forefront of their impact. 

 

FTC Announces Rule Banning Noncompetes

The first major labor update concerns the changing of rules around non-compete agreements. Chances are, if you’re reading this, you have a non-compete agreement in your employee contract. In other words, this rule update likely affects you. 

On April 23, 2024 the Federal Trade Commission voted to ban most non-compete clauses as an “unfair method of competition.” 

This rule update applies to all paid and unpaid workers, though there are a few exceptions to this revision, which include “senior executives” and certain types of banks, non-profits, and other organizations that aren’t subject to FTC’s authority. 

“Senior executives” are defined as someone with a total annual compensation more than $151,164, as well as someone “in a policy-making position.” This includes those in a president, CEO, or officer level position, and because of their unique influence on a company’s future, they are not subject to this revision. 

This change will open up additional opportunities for our Candidates to seek employment at companies they may not have previously been allowed. In addition, our Clients are now required to inform all workers with previously valid non-compete clauses that these will not be, and cannot be, legally enforced against the worker. The notice must be provided in writing by hand deliver, mail, email or text message, and group communications are permissible. 

There’s still a lot to be unpacked and understood about this rule update, so both Clients and Candidates should proceed with caution. The update does not take place until later this year, and even then, there may be legal challenges or future updates that carry risk. 

Nevertheless, this is a major labor update that Emerge is following, and we will keep our Clients, Candidates and partners abreast as necessary. 

 

U.S. Department of Labor Updates Overtime Protections

The second major labor update to labor is related to the Fair Labor Standards Act (FLSA), a federal law that establishes minimum wage, overtime pay, and other standards for employees in the private sector and in Federal, State, and local governments. Within FLSA, the Department of Labor requires that certain types of workers that log more than 40 hours in a week get paid more, accordingly. 

On April 23, the same day as the FTC ruling on non-compete clauses, the U.S. Department of Labor announced a rule update that alters the exemption from minimum wage and overtime pay requirements for “executive, administrative, and professional” (EAP) employees. The update changes the “standard” and “highly compensated” salary level threshold to reflect current earnings data.

This update goes into effect July 1, 2024, and it states that “most salaried workers who earn less than $844 per week will become eligible for overtime pay.” Additionally, starting on Jan. 1, 2025, “most salaried workers who make less than $1,128 per week” will become eligible for overtime pay. Businesses will now need to navigate these new thresholds and criteria, which require a thorough review of employee classifications and payroll practices to avoid costly penalties and ensure fair compensation practices are upheld.

This language in this rule change may force some companies to rewrite job descriptions and reissue job offers to their employees as a means to stay in compliance before these deadlines occur. Even our team at Emerge is reissuing letters to our workforce to ensure that we remain compliant through these changes. 

 

Compliance Strategies For Both Rule Updates 

Effectively navigating both of the changes in non-compete and overtime rules over the next 12 to 18 months may be a challenge, which is why recommending thoroughly reviewing all job descriptions to assess whether any positions previously classified as exempt from overtime now fall under the non-exempt category due to the updated rules. This will likely require adjustments in how these roles are managed and compensated. 

An ongoing and consistent review of job classifications and descriptions must become a routine part of business operations, enabling companies to remain compliant as laws evolve and workforce dynamics change. 

 

What Comes Next for Non-Compete and Overtime Rules? 

While future changes to each rule could be on the horizon, we are also likely to see lawsuit challenges that also affect these rules. It’s not impossible that such lawsuits could end up in the Supreme Court, for example. In addition, both the FTC and Department of Labor are subject to the shifting political landscape, and as 2024 is an election year here in the United States, companies should be advised that the rules could be changed yet again after the election. 

All of this to say that it is critical that our Clients and Candidates continue to stay as updated as possible to remain compliant through the waves of transformation—and whatever comes next. As major updates to labor rules occur, Emerge is committed to keeping our Clients, Candidates and partners in the know

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