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If you had April 23, 2024 as the biggest day in employment law of the year on your bingo card, congratulations. You won. Hands down.

Yesterday was such a blockbuster of a day, it’s hard to wrap your head around it. (My partner Sarah Westby and I have tried, and have summarized the results on our sister blog, Employment Law Letter.)

With new rules on non-compete agreements and overtime exemptions, there’s a lot to digest.

First, the Federal Trade Commission released it’s final rule that bans virtually all non-compete agreements for workers in the United States. The rule is scheduled to go into effect in 120 days.

BUT, before you go changing all of your non-compete agreements, the rule is going to have to pass legal challenges. Indeed, we’ve seen time and again over the last several years that some courts (particularly in certain jurisdictions in Texas and Louisiana) have shown a propensity for issuing nationwide injunctions putting such rules on hold while the legal challenge is pending.

That’s not to say that employers should ignore the rule. Far from it. But it also means that employers should be mindful that this isn’t quite written in stone yet.

What should employers know about the new rule? Here are four takeaways:

  1. For workers other than “senior executives,” the rule states that it is “unfair” (and thus illegal) to enter into, enforce, or represent that a worker is subject to a non-compete clause. That means that all non-compete clauses between employer and employee will be invalid in about 4 months.
  2. For “senior executives” (namely those in a policy-making position making more than $154,161 yearly), the rule states that it’s “unfair” (and again illegal) to enter into a new non-compete clause after the effective date, enforce such a clause, or represent that a senior executive is subject to one entered after the effective date. Current non-compete agreements for senior executives will be allowed to stay in effect.
  3. The rule also requires employers to provide clear and conspicuous notice to workers with existing non-compete clauses that those clauses will not be enforced against them. The notice must identify the entity, and be delivered via paper, mail, email, or text. No notice is required if the employer doesn’t have the worker’s contact information. Note that a “worker” is defined broadly to even include independent contractors as well.
  4. There are a few limited exceptions. The rule exempts non-compete clauses related to bona fide sales of businesses or ownership interests and existing causes of action. Also, it is not entirely clear that partnership agreements will be covered by this. In addition, it’s unclear whether the FTC will view clauses that provide financial incentives for employees to stay employed will be treated as de-facto non-compete clauses. In other words, we now know what is prohibited but we don’t yet know what would pass muster. Non-solicitation and confidentiality provisions appear to survive but other types of provisions will no doubt be the subject of debate.

On our sister blog post, we provide some things that employers may also want to consider in the upcoming weeks.

If that were the only big thing from yesterday, that would’ve been enough. But the United States Department of Labor also released a final rule modifying the white collar exemptions to overtime. If this sounds familiar, it’s because the Obama administration attempted to do the same thing in 2020 (only to have its rule held up in legal challenges).

This rule will go into effect on July 1, 2024 (but again, is likely to be the subject of a legal challenge).

By way of background, employees who employers designate as exempt from overtime, must meet a salary minimum and a duties test. The proposed rule increases the salary minimum so that anyone below that threshold will need to be paid overtime, regardless of the duties that they have.

Here are the three other things employers should know about the rule:

  1. As noted The new rule increases compensation thresholds for overtime-exempt employees who otherwise meet the Executive, Administrative, Professional or Highly Compensated Employee exemptions, and puts in place a schedule for review of these thresholds every three years.
  2. With respect to compensation thresholds, the new rule sets a schedule of increases in two parts.  The first will take effect on July 1, 2024, increasing the current minimum annual salary for exempt employees from $35,568 ($684/week) to $43,888 ($844/week).  The second increase will take effect on January 1, 2025, increasing the minimum annual salary to $58,656 ($1,128/week).  This represents a 60% increase over the course of a year.
  3. In addition, the annual salary threshold for the Highly Compensated Employee exemption will increase to $132,964 ($2,557/week) on July 1, 2024, and $151,164 ($2,907/week) on January 1, 2025.  Note that Connecticut does not recognize a highly compensated employee exemption.

Suffice to say that both of these rules raise a whole host of issues, some specific to particular employers. Thus, you should seek out particular legal guidance applicable to your business and jurisdiction.

Big days like yesterday require big responses from employers. These new rules should keep you (and employment law lawyers like myself) busy for some time.