Help  |  Pay an Invoice  |  My Account  |  CPE Log  |  Log in

Critical new employment changes employers should be aware of


May 16, 2024

Two new employment changes will affect most employers this summer. 
The first addresses all employers with noncompete clauses in hiring offers or employment agreements, while the second addresses overtime and exempt status of employees.

Noncompete agreements

On April 23, 2024, the U.S. Federal Trade Commission (FTC) voted to finalize and promulgate a final rule that bans noncompete agreements for the vast majority of workers.

The rule bans almost all employment noncompete agreements* after the effective date of Sept. 4, 2024. This applies to all workers (including senior executives). This will supersede the Minnesota law forbidding new noncompetes but allowed existing noncompetes to remain in force. 
*One exception to the rule allows existing noncompete agreements to remain in place for certain “senior executives” after the effective date. Senior executives are employees “earning more than $151,164 annually who are in a policy-making position.” A second exception is for noncompete agreements (1) in franchisee-franchisor relationships (although the rule applies to employees who work at franchises); (2) with certain nonprofit organizations who are not subject to the FTC’s jurisdiction; or (3) in connection with the sale of a business entity (regardless of ownership stake percentage).
The rule also requires employers to provide notices to employees stating that existing noncompete agreements will not be enforced. The notice must identify the person who entered into the noncompete with the worker. Additionally, the notice must “be on paper,” delivered by hand, by mail, by email or by text message. Model language for the notice is provided in the final rule that employers may use.

Several legal challenges to the rule are expected. Challenges will likely object to the FTC’s authority and whether the FTC exceeded that authority by mandating such an expansive substantive rule.

Next steps

While challenges will likely delay enforcement of the rule, employers will need to both make plans to comply with the final rule and also consider legal alternatives to noncompete agreements in order to protect customer and employee relationships and confidential or trade secret information. Trade secret, nonsolicitation and proprietary information agreements remain valid. Employers should seek legal counsel regarding these agreements and potential reminders to employees.

Overtime regulations

On April 23, 2024, the U.S. Department of Labor (DOL) issued a final rule raising the salary threshold for certain workers exempt from the overtime requirements of the Fair Labor Standards Act (FLSA). As written, the rule requires employers to analyze whether they must raise the salaries of their exempt workers as early as July 1, 2024, with subsequent increases to follow. 

The current rule 

Under the current FLSA rule, most employers must pay their employees time-and-a-half of their regular rate of pay for all overtime hours worked unless an employee satisfies one or more of the exemptions identified in the statute. The most commonly utilized exemptions include the executive, administrative and professional (EAP) exemptions which require the employee to meet specific duties and pay levels.

The current minimum salary threshold for the EAP exemptions is $684 per week or $35,568 per year.

Additionally, highly compensated employees can also be exempt from the FLSA’s overtime pay requirements. Currently, the salary threshold for the highly compensated employee exemption is $107,432 per year. 

The highly compensated employee rule is designed for employees who perform a limited number of executive, administrative, or professional duties, but are so well compensated that they still qualify to be exempt as White Collar Employees.

Under the current rule, a highly compensated employee is deemed exempt if:
  1. The employee earns total annual compensation of $107,432 or more, which includes at least $684 per week paid on a salary or fee basis;
  2. The employee’s primary duty includes performing office or nonmanual work; and
  3. The employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative or professional employee.
For example, an employee may qualify as an exempt highly compensated executive if the employee customarily and regularly directs the work of two or more other employees, even though the employee does not meet all the other requirements in the standard test for exemption as an executive.

The new rule

After several delays, on April 23, the Department of Labor (DOL) released its final rule increasing the salary threshold for the EAP and highly compensated executive exemptions.

The final rule raises the minimum salary threshold for EAP workers to $844 per week or $43,888 per year effective July 1, 2024, and a second increase to $1,128 per week or $58,656 annually effective Jan. 1, 2025.

For highly compensated employees, the threshold will increase to $132,964 in July 2024, and to $151,164 in January 2025. The rule also provides for automatic salary increases every three years thereafter, beginning on July 1, 2027.

The DOL has stated it will establish those increases based on its evaluation of the earnings data in the United States available at the time of the increase. 

Likely challenges 

Based on past history of FLSA changes, the final rule will likely face legal challenges. In addition to past arguments alleging the rulemaking process did not satisfy the mandates of the Administrative Procedure Act, it is likely the rule will be challenged as exceeding the statutory authority of the DOL. 

Next steps

Employers should examine their current employee classifications under the new FLSA to ensure compliance by July 1, 2024 and not assume that a challenge to the rule will be successful. Employers should review their existing exempt workers’ duties, salaries and identify whether any increases may need to be made to comply with the rule’s increases.  
To be exempt, each employee must meet all three of the following tests:
  1. The minimum salary of $844 per week or $43,888 per year effective July 1, 2024, and $1,128 per week or $58,656 annually effective Jan. 1, 2025 must be paid. 
  2. The weekly salary must be paid regardless of hours worked and quality/quantity of hours worked should not be considered.  Therefore, there is no part time adjustment for the salary requirement allowed.
  3. The employee must fall into one or more of the exempt categories as their “primary duties”.  Primary duties require where the employee spends the majority of time and is the focus of their position:
    1. Executive (directly supervise two or more full time equivalent employees)
    2. Administrative (note the administrative exemption requires a high bar of independent judgement and decision making on “matters of significance”.  Generally, administrative assistant, executive assistant and similar roles do not fall into the exempt category.
    3. Learned professional (B.A. or B.S. required for the role and alternative education or equivalent experience does not meet this standard)
    4. Creative professional (invention or original artistic work required)
    5. Computer professional (programming or coding required) or
    6. Outside salesperson (no salary requirement but inside sales do not meet the standard)
Employers may also use nondiscretionary bonuses (formal documented plans) and incentive payments (including commissions) paid on an annual or more frequent basis, to satisfy up to 10% of the standard salary level.
Organizations may wish to use the new regulation as the basis to change improperly classified employees from exempt to nonexempt status and therefore require timekeeping and overtime payments after 40 hours in a defined work week (seven consecutive calendar days).
Careful communication to employees regarding the change from exempt to nonexempt status should be addressed.  Often employees will feel they are being “demoted” or viewed as less valuable if moved to nonexempt statue.
Additionally, there will be an updated FLSA posting required with the new salary levels and include the new PUMP Act and Pregnant Worker Fairness Act information.
Additional information on these classification for FLSA exemptions may be found on the DOL's website.
Please reach out with questions.
Larry Morgan, MA, SPHR, SHRM-SCP, GPHR, is the president of Orion HR Group and frequent MNCPA instructor and author. He is also the expert behind the MNCPA HR Hotline. Morgan brings more than 40 years of HR experience to the MNCPA in areas that include retail, high-tech, manufacturing and financial services. You can reach him at or 952-210-0742