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FTC Ban of Noncompete Clauses

On Behalf of | May 13, 2024 | Publications

The Federal Trade Commission (“FTC”) has issued a “final rule,” termed the Non-Compete Clause Rule, on April 23, 2024, effective 120 days after it is published in the Federal Register. The final rule will be codified at 16 C.F.R. §910. The final rule makes the enforcement of non-compete agreements an unfair and harmful method of protecting employers, as non-compete agreements directly result in limitations on new business and innovation, thereby creating a burden for both consumers and “workers.” The “final rule” defines a non-compete clause as:

a term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from (1) seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or (2) operating a business in the United States after the conclusion of the employment that includes the term or condition.

A worker is defined as:

a natural person who works or who previously worked, whether paid or unpaid, without regard to the worker’s title or the worker’s status under any other State or Federal laws, including, but not limited to, whether the worker is an employee, independent contractor, extern, intern, volunteer, apprentice, or a sole proprietor who provides a service to a person.

The scope of the final rule is broad and preempts all state laws “to the extent, that such laws would otherwise permit or authorize a person to engage in conduct that is an unfair method of competition under § 910.2(a) or conflict with the notice requirement in § 910.2(b).” Additionally, the final rule is retroactive, with the exception of non-competes involving senior executives, which agreements existed prior to the effective date of the final rule. Senior executives are employees earning $151,164.00 in a “policy-making position.” For all other workers, the final rule bans the enforcement of existing non-competes and requires employers to notify their employees of this change. Furthermore, the final rule will prohibit all new non-compete clauses, on or after the effective date, for all employees, including senior executives.

The exact effective date of the final rule is uncertain. Already, there are legal challenges to the rule. Within a day of the issuance of the final rule, the U.S. Chamber of Commerce and the Business Roundtable filed a lawsuit against the FTC in federal court in the Eastern District of Texas.

Please contact a member of our Labor and Employment Section for more information. Links to the final rule and FTC’s press release are below.

Non-Compete Clause Rule and Supplementary Information FTC April 23, 2024 Press Release

The Providing Urgent Maternal Protection for Nursing Mothers Act (“PUMP” Act)

The PUMP Act went into effect on December 29, 2022 amending the Fair Labor Standards Act (“FLSA”) with enforcement as of April 28, 2023. The PUMP Act expanded employers’ obligations to all employees, both exempt and non-exempt, who are covered by the Fair Labor and Standards Act. The PUMP Act requires “reasonable break time” for their employees to express milk for a nursing infant’s first year after birth. Under the PUMP Act, a covered employee is allowed to take a break each time they need to express milk. Furthermore, the Act applies to teleworking employees.

Additionally, the employer must provide “a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public,” including security cameras. Under the FLSA, even if a bathroom is private, it is not a permissible location for an employee to express milk. However, it can be a space temporarily created/converted into a space when needed. The space must allow for sitting and provide a place to store the breast milk.

The employer cannot dictate the employees’ schedules on when to take their breaks to express milk. While a schedule can be created between the two parties, the employee may adjust the schedule to suit their needs. The PUMP Act does not require employers to pay the employees during the pump breaks. If the employee is not completely relieved from their work duties, then the employer must consider those hours as worked.

The PUMP Act provides legal recourse for the employee if their employer fails to comply. If an employer violates the PUMP Act, the employer has 10 days to comply after an employee notifies the employer of violating the PUMP Act requirements. Currently, Ohio does not have state-level workplace breastfeeding laws and the PUMP Act is the only law employers are required to follow regarding expressing milk.

Changes to Employee Eligibility to Overtime

In April 2024, the U.S. Department of Labor announced an increase to the Fair Labor Standards Act’s (FLSA) annual salary-threshold for white-collar exemptions to overtime requirements. The salary threshold will increase twice in the upcoming months. The first salary threshold will increase from $35,568 to $43,888 effective July 1, 2024. As of January 1, 2025, the salary threshold will increase again to $58,656. Additionally, the Department of Labor will automatically increase the salary threshold every three years starting July 1, 2027.

Employees must be paid a salary of at least the threshold amount and meet the duties tests outlined under FLSA. There are three main categories under the duties test for “white-collar” exemptions: executive, administrative, and professional employees. If an employee is not paid at the threshold level or does not meet a duties test, then the employee must be paid 1 ½ times their regular hourly rate for hours above 40 hours in a workweek.

Employers need to be cognizant of this upcoming change. We recommend employers review the employees that are currently above the salary threshold, but will be below it on July 1, 2024 and January 1, 2025. The analysis for determining liability under the FLSA can be complicated because it involves not only the salary threshold but also the job duties tests as well.

We will be providing a more detailed look at this new law in an upcoming article. Please contact a member of our Labor and Employment Section with questions or concerns.

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