Have you heard? Two big, federal changes have been announced this week that will likely have a significant impact on HR and employers.
New Overtime Rule Raises Salary Level
Effective July 1, 2024, workers earning less than $43,888 per year ($844 per week) will be eligible for overtime pay if they work more than 40 hours per week. The threshold will expand again January 1, 2025, to $58,656. This is up significantly (nearly 65%) from the current $35,568 a year. The Department of Labor (DOL) announced the Final Rule: Restoring and Extending Overtime Protections on April 23, 2024.
Workers are exempt from the FLSA’s minimum wage and overtime protections only when the following applies:
1. An employee is paid a salary,
2. The salary is not less than a minimum salary threshold amount, AND
3. The employee primarily performs executive, administrative, or professional duties.
The DOL’s final rule also increases the total annual compensation thresholds for highly compensated employees (HCEs) from the current $107,432 to $132,964 effective July 1st, and $151,164 effective January 1, 2025. The thresholds will be increased again on July 1, 2027, and every three years thereafter.
Employers should begin to prepare for this change by reviewing exempt employees whose salaries fall between the current $35,568 and the new thresholds. Employers have the option of increasing the salaries above the thresholds or reclassifying employees as nonexempt. This change may be challenged legally, but employers are encouraged to proceed with preparations for the change, albeit with caution and potential for uncertainty.
FTC Moves to Ban Non-Compete Agreements
On April 23, 2023, the US Federal Trade Commission (FTC) approved a proposed Final Rule banning nearly all new noncompete clauses in employment agreements. The Final Rule bans non-compete clauses that are entered into after the effective date for all workers.
The Final Rules does allow continued enforcement of existing non-competes entered into prior to the effective date if the employee meets the definition of a “senior executive.” Upon the effective date, the Final Rule voids all existing non-compete clauses for individuals who are not considered senior executives. Employers will be responsible for notifying employees that the non-compete clauses are no longer enforceable.
The Final Rule is not in effect yet. It becomes effective 120 days following publication in the Federal Register (no specific publication date has been announced). The Final Rule will supersede all state laws that conflict with the rule. Legal challenges to the rule are anticipated and could significantly delay implementation. Employers should be proactive in reviewing current agreements and consider nondisclosure and non-solicitation agreements if they are not currently in place.
The Good News?
If there’s any good news regarding these announcements, it’s that Human Capital Management technology can help employers adapt to the outcomes with minimal disruption. Figuring out what you as an employer need to do in response to these changes is difficult enough. Ease the burden of implementing these and future employment changes by leveraging the power of People Savvy HCM, a modern, all-in-one HCM system designed to simplify and enhance every aspect of managing your workforce. Reach out today, and let us know how we can help your business’s HR, payroll, and workforce management needs.
