Beckway Insights: Important Updates on Two Major Federal Initiatives in the U.S. Employment Space

Follow up on the latest DOL Rule on Overtime Eligibility and a new FTC Rule on Non-Compete Agreements:

▪️ What’s this About?

  1. A rapidly approaching US Department of Labor (DOL) rule on Overtime eligibility that goes into effect on July 1, 2024, with an additional step up on January 1, 2025.
  2. And a new rule from the US Federal Trade Commissions (FTC) banning the wide use of Non-Compete Agreements is currently scheduled to go into effect “around September 2024.”

▪️ DOL Rule on Overtime Eligibility

After a prolonged and challenging approval process, a DOL Rule was enacted that will change eligibility for certain employees to be paid for working more than 40 hours in a defined period. Specifically, the rule covers salaried positions currently earning less than $844.00 per week, or $35,568.00 per year, making them eligible to report and earn overtime pay. This part of the new rule goes into effect on July 1, 2024.

There is an additional step up to employees earning $1,128 per week, or $58,656.00 per year, effective January 1, 2025. As these changes occur, salaries, job duties and subsequent FLSA job classifications will continue to determine overtime exemption status for most salaried employees.

▪️ What should we be focusing on?

There are a few quick actions needed. Determine what positions and who in the organization could be impacted. There are only a few ways to address this and one action in the past was to issue salary increases to keep the position or job type “above the line,” and therefore ineligible for overtime.  We typically see first line managers or other skilled workers that earn less than the thresholds being impacted. Additionally, in some cases, positions may need to be rescoped or reclassified to meet FLSA guidelines.

Obviously, 2024 and 2025 salary and OT budgets are very likely to be impacted.

▪️ New FTC Rule on Non-Compete Agreements

By now, you may have heard that the FTC has narrowly voted in favor of a new rule that changes the right for employers to issue and hold past and present employees accountable to a Non-Compete Agreement.

Non-Competes have been in use for a long time in the US. Companies tended to either blanket apply the non-compete agreements to all employees or segment the organization and issue a non-compete to only a few groups, typically salespeople, engineers, management at all levels, and other key roles that are deemed essential to the company’s ability maintain its edge on new product development and in general, to compete in the marketplace.

▪️ What should we be focusing on?

Should the rule withstand the promised legal challenges it would require employers to dissolve or remove existing non-compete agreements and immediately cease issuing non-competes as a part of the employment offer process.

At the very least, the team should now be taking stock of which roles and how non-competes are and have been issued, as there may be now new employment documentation suggested.  If there was specific “consideration” provided to ease the issuance of a non-compete, employers should evaluate the conditions for providing the consideration and get help to determine next steps. Additionally, it may be wise to take stock of any vulnerable employees that have or are being sourced by competitors, taking appropriate actions soon, and to refine the talent acquisition process as needed.

This rule change does not impact non-solicitation agreements.

▪️ What if I have questions about either rule, or just need help?

Should you or your HR team have questions on these new rules, please don’t hesitate to reach out to our HR Practice leaders listed below. We are ready to help.