Complete Story
04/26/2024
Special HR Compliance Update
New FTC, DOL rulings will impact organizations
On April 23, 2024, the Federal Trade Commission (FTC) and Department of Labor (DOL) announced major changes regarding non-compete agreements and the salary exemption threshold respectively.
The FTC declared a ban on all non-compete agreements to go into effect 120 days after it is published in the Federal Register. The rule requires employers to inform present and terminated employees that their non-competes are no longer enforceable. There is an exception that upholds existing non-competes for senior executives making over $151,000 annually; however, it will prohibit future non-competes for such executives.
Employers would be wise to begin a review of their existing non-competes and work with their legal advisors to identify potential impacts. According to Littler Mendelson, employers may continue to leverage confidentiality and non-solicitation agreements to help protect proprietary information and prevent client poaching.
While employers should be prepared for these changes, it is widely anticipated that there will be lawsuits emerging in the coming weeks to challenge the FTC ruling.
Salary Exemption Threshold Increase
Separately, the DOL also announced scheduled increases on the salary exemption threshold, which currently stands at $35,568 annual. The rule states effective 7/1/24, the exemption threshold will raise to $43,888 annual (or $844 per week). Effective 1/1/25, the exemption threshold will further increase to $58,656 annual (or $1,128 per week). Additionally, the salary level required to be considered a “Highly Compensated Employee” will increase from $132,964 annual to $151,164 annual on 1/1/25.
Considering the upcoming July 1, 2024 effective date, employers should begin identifying impacted employees and work with their legal advisors to prepare plans to comply with the requirements. Some options may include either increasing salaries to meet the new exemption threshold or transitioning those employees to non-exempt (and thus overtime eligible) status.
Employers should also confirm that all exempt employees are performing exempt-level responsibilities. Employers can leverage job descriptions to ensure that the Fair Labor Standards Act “duties test” is met for each of their exempt-level roles.
Similar to the FTC ruling, it is widely anticipated that there will be lawsuits filed in the coming weeks to challenge the DOL ruling. The results of the lawsuits may impact the rule itself of the effective date of the rules
Thank you to Clark Schaefer Strategic HR for sharing this update with OSAP and its membership.
