Important Update on Proposed Ban of Non-Compete Agreements and New Overtime Salary Rules

PROPOSED BAN ON NON-COMPETE AGREEMENTS

As Mr. Chotiner mentioned in the prior alert, the FTC issued a final rule that would prohibit nearly all non-compete agreements. As expected, the U.S. Chamber of Commerce and others filed lawsuits challenging the new rule. On July 3, a federal judge in Texas issued a preliminary injunction finding that the FTC lacks authority to ban non-compete agreements. However, the judge declined to issue a nationwide injunction against enforcement of the new rule. Instead, the preliminary injunctive relief only benefits the U.S. Chamber of Commerce and the other plaintiffs in that particular case. In other words, at this point the FTC is not prohibited from enforcing the non-compete ban against anybody else once it goes into effect.

The new rule is scheduled to go into effect on September 4, 2024. Although the preliminary injunction only benefits the plaintiffs in the Texas lawsuit, the judge has indicated she expects to issue a final ruling by August 30, 2024. Since the judge has already found that the FTC lacks authority to ban non-compete agreements, it is possible the final ruling will incorporate a nationwide injunction that will prohibit the FTC from enforcing the new rule against anybody. There are other pending lawsuits challenging the rule, and we may receive rulings from those cases before September 4.

For now, employers should still be preparing in the event the new non-compete rule is implemented.

NEW OVERTIME SALARY RULE

As explained in the prior alert, the DOL issued a new rule raising the minimum salary necessary for an employer to classify an executive, administrative or professional (EAP) employee as exempt from the minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA).

Similar to the FTC’s ban on non-compete agreements, various lawsuits were filed challenging the DOL’s new salary requirements. On June 28, another federal judge in Texas issued a preliminary injunction finding that DOL lacks authority to impose minimum salary amounts for application of the EAP exemptions under the FLSA. However, as in the FTC lawsuit discussed above, the judge in the DOL lawsuit declined to issue a nationwide preliminary injunction, and relief from enforcement of the new DOL rule is limited to the State of Texas, which filed that lawsuit.

Accordingly, as of July 1, the new DOL salary rule is in effect for all employers (except the State of Texas) in the United States who are otherwise covered by the FLSA. It is possible the new salary rule will ultimately be blocked across the board, but for now employers must comply with the new minimum salary amounts.

As indicated in the prior alert, as of July 1, executive, administrative or professional employees must earn a salary of at least $844 per week ($43,888 per year), and highly compensated employees must earn a salary of at least $132,964 per year. Unless otherwise blocked by the courts, these minimum amounts will increase again effective January 1, 2025, with executive, administrative or professional employees earning a salary of at least $1,128 per week ($58,656 per year), and highly compensated employees earning a salary of at least $151,164 per year.

The Labor and Employment Law Practice Group at Shapiro, Blasi, Wasserman & Hermann advises businesses of all sizes on employment law compliance and provides creative and effective defensive approaches when claims are asserted. Each situation is different and this article does not constitute legal advice. Please do not hesitate to contact Adam S. Chotiner at achotiner@sbwh.law or (561) 477-7800, or visit our website at www.sbwh.law.