Two Big Changes Just Happened to Employment Law

Well, it finally happened: the government, through the Federal Trade Commission (FTC), finally and after much speculation, made the use of noncompete agreements, for the most part, illegal.

Long Discussion Ends in a Ban

This is not a new or unexpected change; the FTC had been debating outlawing noncompete agreements for the past year, and had been soliciting comments from the public on the pros and cons of outlawing the agreements.

It seemed like the FTC might ban the noncompete agreement, but with some carve outs: for example, exempting certain people who make above a certain minimum salary.

But in the end the ban was passed, without any carve outs or exceptions at all. The only exception is that for some senior level executives, who already agreed to a noncompete agreement, their noncompete agreement can remain in effect. Additionally, other agreements that don’t specifically restrict employment, like confidentiality agreements or non solicitation agreements, are not affected by the ban.

For anybody else who may have signed a noncompete agreement, their agreement will now become ineffective and unenforceable. Additionally, the rule will require employers to tell employees that their noncompete agreements are now unenforceable.

Change Will Get Some Push Back

Proponents of the ban say that noncompetes affect lower level workers disproportionately, negatively affect unemployment statistics, and keep competition out of the market. But others say noncompetes are a vital way that businesses protect their trade secret from being sued against them, when an employee leaves or is terminated.

If you’re a business relying on a noncompete agreement, hope is not lost; the ban is being challenged, and it remains to be seen what courts will do with the issue.

Changes to FLSA and its Exemptions

There was also a change to the Fair Labor Standards Act (FLSA). The FLSA contained exemptions for those who earn over a given salary, and those who worked in certain professional or executive level positions, if they made over a certain salary.

For “normal” workers, they are now exempt if they make more than $58,656 per year, whereas it used to be that $43,888 was the cutoff to be exempt. For higher level executives in managerial or supervisory or professional positions, the salary exemption is now about $151,000, whereas it used to be $133,000 per year.

Those salary cutoffs are not static either; the changes now require that they be re-evaluated and adjusted every three years, to keep up with inflation and increases or decreases in salaries.

The effect of these increased exemption salary limits is that more workers will be covered, and fewer will be exempt from the FLSA, meaning that businesses may need to pay more workers than they did, in accordance with the FLSA, and will have to follow other rules and regulations required by the FLS. That includes the payment of overtime for hours that exceed 40 hours a week.

Questions about new laws that affect your business? Call the West Palm Beach business litigation attorneys at Pike & Lustig today.

Sources:

dol.gov/newsroom/releases/whd/whd20240423-0

ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes