Big Changes for US Workers: Overtime Pay, Non-Compete Restrictions Explained

This week, the federal government took two steps that could have far-reaching effects for millions of American workers.

The Federal Trade Commission decided to outlaw noncompete clauses in one go, prohibiting millions of employees from quitting their jobs to work for competing companies or launch their own ventures for a certain amount of time. The FTCâ€^TMs approach, which is already being challenged in court, would mean that such employees might apply for jobs they werenâ€^TMt previously eligible to seek.

Subsequently, the Biden administration published a final regulation extending the eligibility of millions of salaried workers for overtime compensation. The wage threshold that employees can reach and still be eligible for overtime is raised dramatically by the rule.

The new regulations do not go into effect right away. They won't help everyone, either. What specifically will these regulations entail for American workers, then?

Noncompete Agreement: What is It?

Noncompete agreements restrict an employee's ability to leave for a rival firm or launch a rival enterprise for a predetermined amount of time. Employers have used these agreements more often in recent years. The goal is to stop workers from giving up trade secrets, employment opportunities, or sales contacts to a direct rival so they may profit from them right away.

Who is Covered By These Agreements?

People might believe that high-level executives in the financial or technology sectors are the only ones covered by noncompete agreements. However, many employees at lower levels are also impacted by these limitations. States have different laws.

Why Are Noncompete Agreements Getting Banned?

Some believe that because noncompete clauses restrict employees' movement, they are harmful and unjust to them. Opportunities for career advancement are frequently more alluring outside of one's present employer. Furthermore, it might be challenging to move into a more advantageous or profitable role due to limitations on the kind of job they can perform for a rival company.

How To Know If You're Subject To a Noncompete

Sometimes people are shocked to hear that they have to abide by such a contract. It's possible that they won't even know until after they've moved on to another position and their previous company steps in to terminate them.

Experts advise workers to inquire about any potential noncompete agreements with their human resources department. If there is no HR department at work, an employee should speak with the company's lawyer.

Are Business Trade Secrets in Danger Now?

Laws protecting businesses' trade secrets are still in effect. That remains unaffected by the FTC ruling.

Additionally, the U.S. The Chamber of Commerce has already sued the Federal Trade Commission, claiming that the agency's ruling sets a risky precedent for governmental micromanagement of the private sector. The FTC's new regulation may not be implemented for years if lawsuits are filed against it.

New Overtime Rules

Employers of all sizes will have to start paying overtime, or time and a half income after 40 hours per week, to salaried employees who work in specific managerial, administrative, and professional tasks and earn less than $43,888 annually. By the beginning of 2025, that maximum will have increased to $58,656. The maximum was $35,568 before.

An estimated 4 million salaried workers who were not previously qualified would be eligible, according to the Labor Department. However, some professions are not impacted by the change and are not eligible for overtime compensation, such as teachers, physicians, and attorneys. Furthermore, wage requirements in certain statesâ€"like California and New Yorkâ€"already surpass federal levels.

What Businesses Should Do

All sizes of businesses will need to reclassify employees who are now eligible for overtime compensation and ensure that hours are tracked and appropriately compensated.

A further option would be to increase employee pay to maintain their exemption from overtime. However, businesses must be aware that the new schedule requires two additional hikes.

They must also decide how they are going to fund the additional overtime compensation. The worst-hit enterprises will be small ones.