FLSA, Overtime and Non-Compete Rulings

How do revisions to the Fair Labor Standards Act (FLSA) and changes in overtime regulations, along with the proposed noncompete rule by the Federal Trade Commission (FTC), impact your business?

Lakeside HR Group Compliance Update, August 2024 – As part of our commitment to keeping you informed, we would like to bring to your attention two significant upcoming legal changes that may impact your business operations:

Recent updates to the Fair Labor Standards Act (FLSA) and Overtime Ruling, and the proposed Noncompete Rule by the Federal Trade Commission (FTC).

Staying informed and proactive is key to navigating these upcoming changes smoothly. As always, our team is here to assist you in any way possible to ensure compliance and mitigate any potential risks to your business.

FLSA & Overtime Ruling

What is changing?

Effective July 1, 2024, the salary threshold for exemption status under the FLSA will increase from $35,568 to $43,888. This adjustment will have a substantial impact on professional services, healthcare, and financial activities. On January 1, 2025, the threshold will increase to $58,656. This ruling will also include a three-year automatic adjustment mechanism for updating automatically.

Additionally, the “highly compensated employee” exemption will see an increase from $107,432 to $132,964 on July 1, 2024, and to $151,164 on January 1, 2025, with subsequent updates every three years.

Where should you start?

We recommend a proactive approach. Take the time to evaluate current exempt roles within your organization. Consider reassessing roles that may have previously been within the gray area of exemption status. For those falling under the new threshold, now may be an opportune moment to review their classification as exempt employees.

FTC Proposed Non-compete Rule

What is changing?

Recently, the Federal Trade Commission (FTC)’s proposed rule to ban non-compete agreements has been rejected by a federal judge in Texas. This means that, for now, non-compete agreements will continue to be valid and enforceable, subject to state-specific regulations.

Specifically for our clients in Minnesota, it’s important to be aware of new state legislation that significantly restricts the enforceability of non-compete agreements. As of July 1, 2023, Minnesota law generally prohibits non-compete clauses in employment contracts for most employees.

Here are the few exceptions to the Minnesota non-compete law:

• Non-compete agreements are still enforceable if they are part of the sale or dissolution of a business, where the seller agrees not to compete with the buyer for a certain period of time.
• Non-compete clauses are permitted for partners or members of a limited liability company (LLC) upon the dissolution of the partnership or LLC, provided the agreement is reasonable in scope and duration.
• While traditional non-compete clauses are restricted, employers can still enforce agreements that protect trade secrets, proprietary information, or confidential business information through other types of restrictive covenants, such as non-solicitation or confidentiality agreements.
• This law does not retroactively apply to non-competes created prior to July 1, 2023.

This decision may affect how you approach employment contracts and employee retention strategies. We encourage you to review your current non-compete agreements to ensure they align with both legal standards and your company’s goals.

Please feel free to contact us if you have any questions or if you would like assistance in revising or drafting agreements in light of this update. We’re here to help you navigate these changes smoothly.

Where should you start?

This ruling is set to take effect on September 4, 2024. We strongly advise reviewing all current agreements with your legal representatives. Specifically, examine existing non-compete agreements and hiring documents to ensure compliance with the new regulations. Additionally, take this opportunity to review non-disclosure and non-solicitation agreements to safeguard your trade secrets and confidential business information effectively.

With the salary thresholds for exemption status and the restrictions on non-compete agreements set to change, it’s crucial for businesses to assess their current practices and make any necessary adjustments to ensure compliance and mitigate risks. Our team is dedicated to assisting you through these transitions, providing guidance and support every step of the way. By staying ahead of these changes, you can position your business for success while safeguarding the rights and well-being of your employees.