Final Regulations That Make it Harder for Businesses to do Business
April 23, 2024
NUMBER 1:
he Department of Labor, DOL, issued a final rule raising the salary that an employee must be paid to be Exempt from overtime pay, “OT” under the so-called white-collar Exemptions: Executive; Professional; Administrative; and Computer Employees. On July 1, 2024, the minimum salary to qualify for these Exemptions will jump from $684 per week ($35,568 annually) to $844 per week ($43,888 annually). Then, it will increase to $1,128 per week ($58,656 annually) on January 1, 2025. Please remember that there are other requirements which must be met to properly classify an employee as Exempt, i.e. be paid on a Salary Basis; and perform specific duties.
The objective and effect of these changes is to make more employees eligible for OT pay, which will obviously make it more costly for many employers to do business. The DOL estimates that these changes will impact 4 million employees.
So, what should employers do now?
- Create a list of Exempt employees who earn less than the new required salary amounts, and decide whether to increase their salary or convert them to Non-Exempt. The number of hours over 40 an employee works (potential OT hours) should be considered in measuring the financial impact of this decision. Additionally, the affect on employee morale must be considered. For example, a supervisor converted from Exempt to Non-Exempt may be demoralized by having to clock in and out with subordinates.
- Communicate changes to Exempt status, or compensation, individually (if possible). An increase in pay to comply with the new levels will obviously be a positive conversation, while those with employees who are reclassified will be more challenging, and should include information about tracking time worked more closely (lunch breaks, after hours communications, etc.). Employees who are reclassified can be told that such is being done to comply with the federal government’s new wage and hour rules.
* Legal challenges to the new rules are likely, however, prudent employers should begin planning for them to take effect as scheduled, as there is no certainty as to the outcome of those challenges. We will provide updates.
NUMBER 2:
The Fair Trade Commission, FTC, issued a final rule that will prohibit employers from utilizing non-compete agreements with almost all employees. Specifically, under the rule, employers will no longer be able to:
- Enter into non-compete agreements with employees; or
- Enforce existing non-compete agreements, unless they are with “Senior Executives,” defined as those earning more than $151,164 annually, with policy making responsibilities.
Additionally, before the effective date of the rule, employers will be required to provide an explicit Notice to employees and former employees that their non-compete agreements are no longer enforceable.
Important notes:
- The rule can’t take effect until August 22 (120 days after it was published in the Federal Register).
- The rule includes model language for the Notice.
- The rule does Not ban other restrictive agreements, such as: customer non-solicitation agreements; confidentiality agreements; non-disclosure agreements; and employee non-solicitation agreements.
- Lawsuits challenging the new rule have already been filed, and more will follow. What will happen with those is anybody’s guess.
So, what should employers do now?
- Develop a Game Plan in light of the new rule. Outside counsel may be utilized to develop a comprehensive plan to protect company interests and information. This can be through the use of the other types of restrictive agreements, as well as Trade Secret protection.
- Put together a list of employees who would be required to receive Notice under the new rule.
- Monitor the court cases.
Recent Posts
On May 28, the US Department of Labor, “DOL,” issued four Opinion Letters in an attempt to answer some “real world” questions Employers have about wage and hour law, governed on the Federal level by the Fair Labor Standards Act, “FLSA.” You can find links to the actual Opinion Letters here: https://www.dol.gov/newsroom/releases/whd/whd20260529-0 . Additional Opinion Letters are also available on that site. Unfortunately, the FLSA is an old law with many complexities and nuances. Set forth below is our attempt to provide the takeaways from two of the Opinion Letters: FLSA 20026-7 – This was a meal period case. The question was whether employees were entitled to pay for time spent walking out of a large facility and going through security to take their meal break. The short answer is no. The employees in this case had the meal period option to leave the worksite or stay onsite. Their choice to leave did not convert their travel time into time worked. The letter notes that the FLSA does not require that employees be given a meal period at all (Please note that state law often does require a meal period). However, if an UNPAID meal period is provided, it must be at least 30 minutes of UNINTERRUPTED time during which the employees are COMPLETELY relieved of all duties. The letter also mentions that employees may be required to stay on the premises during the unpaid meal period, provided they perform no work. FLSA 2026-5 – The question in this letter was whether an employee who is properly exempted from overtime can also be paid for working in an hourly position that is not exempt from overtime. The short answer is yes, provided that the employee’s PRIMARY DUTY is in the overtime exempt position. The case involved nurses who worked 62 – 77% of their weekly hours in a properly overtime-exempt Specialist position; with the other hours being worked in an hourly nonexempt Floor Nurse position. Under the FLSA, an exempt employee can pick up extra hourly shifts in a non-exempt role and be paid hourly for that non-exempt work, so long as their primary duty is exempt work and they are paid the full guaranteed salary for the exempt position on a salary basis.
With military deployments of National Guard, and other military personnel, being at a 20 year high, employers are likely to have employees who request to be absent from work due to military service. Set forth below is a summary of the protections provided to such individuals by USERRA. This is only a summary. This law contains more provisions, and some complexities, as do most federal laws. Additionally, state laws may also be applicable. Employers should consult an expert for specific guidance. USERRA SUMMARY USERRA applies to all employers: There is no threshold based on the number of workers. An employer with just one employee must provide USERRA protections. Prohibition against discrimination and retaliation : Employers cannot deny initial employment, reemployment, retention, promotion, or any benefit on the basis a person’s membership, application for service, or obligation for service in the armed forces. Retaliation is similarly prohibited. Continuation of benefits while on leave : Employers must provide eligible employees with up to five years of unpaid leave during the life of their employment. Throughout this period, employers must maintain the employee’s seniority, health care, and pension benefits. Right to reemployment : Returning service members have a nearly unfettered right to reemployment by their pre-service employers upon timely application for return to work – and need to be returned to a position and pay level they would have risen to had they remained at work during their military leave. Exception to at-will employment: Employees returning from protected leave are no longer pure “at will” employees for a period of time following reemployment. If the deployment was for more than 30, but less than 180 days, they can only be terminated “for cause” for 180 days following reemployment, or for one year if the length of deployment exceeded 180 days.
On March 16, 2026, ICE updated its Form I-9 Inspection fact sheet, effectively superseding prior guidance that had governed I-9 enforcement for nearly three decades. Specifically, more than 10 error categories previously treated as correctable technical violations—eligible for the statutory 10-day cure period—are now reclassified as substantive violations subject to immediate fines of $288 to $2,861 per violation. What Has Changed
A recent Opinion Letter from the Department of Labor, “DOL,” serves as a good reminder that incentive bonus payment usually must be included in an employee’s regular rate used to calculate overtime. The Opinion Letter dealt with an employer in the waste industry that paid drivers a bonus every pay period if certain safety and performance criteria (punctuality, attendance, and consistency in completing daily safety tasks) were met. Not surprisingly, the DOL found that the bonus amounts should be included in the regular rate of pay for overtime calculation purposes, because the payments were incentives and Discretionary Bonuses. Discretionary bonuses may be excluded from the regular rate of pay if: (1) the fact and amount of the payment are determined at the SOLE Discretion of the employer; (2) with the determination being made at or near the time of the period when the work was performed; and the payment must not be made pursuant to any prior contract, agreement, or promise causing the employee to expect such payments regularly. The payments in this case were made pursuant to a predetermined plan to incentivize work performance. A true Discretionary bonus which can be excluded from overtime is quite unusual. Accordingly, most bonus payments must be included in overtime calculations.
As employers will recall, a federal court struck down the Fair Trade Commission’s (FTC) proposed ban on employee non-compete agreements over a year ago. The FTC has since abandoned its effort to enforce a rule completely banning such agreements. However, in September, the FTC surprised some by announcing that it intends to regulate the use of employee non-competes on a case-by-case basis. It seems that the FTC will consider whether the restrictions are “reasonable” by determining whether they are no greater than is necessary to protect the employer’s legitimate interests, balancing those interests against the hardship to the employee and public. Some factors that are likely to be considered are: The size of the company, both in terms of employees and business; Whether the employer requires non-competes of all employees, or only those with job duties that might justify their use to protect the employer’s interests; The scope of the geographic and time limitations contained in the non-competes. This “reasonableness” determination is very similar to the analysis that many state courts use in determining whether to enforce a non-compete. The FTC has announced its intention to put particular focus on employers in the healthcare space. However, all employers utilizing non-compete agreements should review the restrictions contained therein in an effort to determine that they appear reasonable under the above criteria.
