New Workforce Rules: Federal Trade Commission Bans Non-Competes, Department of Labor Redefines Overtime

Sarah Hohman, Director of Government Affairs

Next up in the newly finalized rules with impacts on Rural Health Clinics, we turn to the recently released Non-Compete Clause Rule from the Federal Trade Commission and Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees Rule from the Department of Labor.

FTC Non-Compete Clause Rule

The Federal Trade Commission (FTC) believes that non-competes, contracts which limit an employee's ability to work for a competitor for a certain period of time, in a certain area or market, after they leave a position are “an unfair method of competition.”

Beginning September 4th, 2024, new non-competes will be banned and existing non-competes for all workers, except for senior executives, will be unenforceable.

Trade secret laws and non-disclosure agreements (NDAs) are not prohibited.

If your organization has existing non-compete agreements, you must provide notice to your employees that these will not be enforced beginning 9/4/2024. Sample notices can be found here.

Enforcement of this rule is via the Bureau of Competition if there is a suspected violation reported.

This rule has already been challenged by the US Chamber of Commerce and the Business Roundtable in Texas, and more lawsuits are expected. This could delay the effective date in certain states.

Whether this rule applies to non-profit organizations is on a case by case basis. Nonprofit organizations must meet a two-part test to be exempt from this rule, as explained by the FTC:

1. "The not-for-profit jurisdictional exemption under Section 4 requires both that there be an adequate nexus between an organization’s activities and its alleged public purposes and,"

2. "That its net proceeds be properly devoted to recognized public, rather than private, interests.”

If this rule holds up in court, the FTC will likely need to issue clearer guidelines on this two-part test because many of the words currently used are subjective.

Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees Rule (Overtime Rule)

This rule expands overtime eligibility for executive, administrative, and professional salaried workers by increasing the threshold required for exemptions.

Currently, employees that make $35,568 or more per year are exempt from federal overtime pay requirements.

Beginning July 1, 2024, this salary exemption threshold will increase to $43,888 per year, and on January 1, 2025, to $58,656, making a much larger population of workers eligible for overtime pay.

This applies to businesses with $500,000 or more in gross annual volume, including nonprofit organizations.

Additional FAQs on the rule can be found here.

Please contact Sarah.Hohman@narhc.org with any questions.