NUMBER 1:
The 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.