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Uh-oh! Non-Compete Agreements Banned & Minimum Salaries Increasing

Two big changes happened earlier this week that will affect how businesses operate and how employers pay their people.

The short version:

  • Non-Compete Agreements Are Dead. Businesses aren’t allowed to make any new non-compete agreements, and all existing agreements – except for some senior executives – are unenforceable.

  • Exempt Employees Must Be Paid More. The minimum salary for exempt employees is increasing significantly – to $844 per week effective July 1, and then again to $1,128 per week effective January 1, 2025. 

Now, let's break these new rules down in more detail because they’re going to make business harder for most of our clients.

FTC's New Rule on Non-Compete Agreements

The Federal Trade Commission (FTC) has issued a final rule that bans non-compete agreements for a wide array of employees, with certain exceptions for high-level executives.

  • Effective Date: The new rule will come into effect 120 days after its publication in the Federal Register, expected around August 1st.

  • Who It Affects: Existing non-compete agreements will be retroactively deemed unenforceable, except for senior executives earning above $151,164 annually.

  • New Agreements: Non-compete agreements will no longer be enforceable against any level of employee.

  • Exceptions: The rule does not affect trade secret laws or non-disclosure agreements. However, the impact on non-solicitation agreements remains uncertain.

  • Employer Obligations: Employers with existing non-compete agreements must notify employees that they will not be enforced.

  • Penalties: The penalties for attempting to create or enforce non-compete agreements under the new rule are yet to be clarified.

The U.S. Chamber of Commerce intends to challenge the implementation of the final rule through legal action. We will keep you informed as the situation unfolds.

DOL's New Minimum Salary for Exempt Employees

The Department of Labor (DOL) has finalized a rule regarding the minimum salary required for exempt employees.

  • Current vs. New Thresholds: The current minimum salary is $684 per week ($35,568 annually). Effective July 1, 2024, it will increase to $844 per week ($43,888 annually), and by January 1, 2025, it will rise to $1,128 per week ($58,656 annually).

  • Legal Ramifications: Failure to comply with these minimum salary requirements can lead to wage and hour lawsuits, with employers facing statutory liquidated damages and attorney fees.

This change is expected to stick. Challenges to the DOL's authority to establish minimum salaries have been upheld in the past, signaling a potentially uphill battle for dissenting parties. 

Employers should assess their ability to afford these raises and consider adjustments to employee classifications and communication strategies.


Need help understanding how this impacts your company and what options are available to you? Schedule a consultation.