The Federal Trade Commission made two significant moves this week that will benefit American workers. First, the FTC voted to ban noncompete agreements. These agreements restrict employees from joining a competitor or starting a rival business for a specific period of time. The new rule is already being challenged in court but if implemented, it will open up new job opportunities for many workers. Second, the Biden administration finalized a rule that will make more salaried workers eligible for overtime pay. Starting July 1, employees making less than $43,888 a year will be entitled to overtime pay for certain roles.
Noncompete agreements have become more common in recent years, affecting both high-level executives and lower-level workers. These agreements are designed to protect a company’s trade secrets and prevent employees from taking valuable information to a competitor. However, critics argue that noncompete agreements limit employee mobility and can be unfair. The new ban on noncompete agreements aims to address these concerns and provide more options for workers seeking new opportunities.
The new overtime rules will require employers to pay time and a half salary to salaried workers making less than $43,888 a year in certain roles after working 40 hours a week. This threshold will increase to $58,656 by 2025. The Labor Department estimates that 4 million salaried workers who were previously ineligible will now qualify for overtime pay. Some occupations, like teachers and lawyers, are exempt from the new rule, and some states already have higher salary thresholds.
While worker groups have welcomed the new overtime rules as a necessary change, some companies are concerned about the impact of the changes. The National Retail Federation has criticized the rules for limiting flexibility in benefits packages and for not giving employers enough time to adjust. The potential legal challenges to the new rules could delay their implementation, as seen with previous attempts to change overtime regulations in 2016.
To prepare for the new rules, companies will need to reclassify workers who are now eligible for overtime pay and make sure they track hours and pay accordingly. Employers may also choose to raise employees’ salaries to keep them exempt from overtime. However, with two more increases scheduled under the new rules, businesses will need to budget for the additional costs. Small businesses, in particular, may struggle to adjust to the new regulations and may have to make difficult decisions about staffing and operations.
