Game-Changing Updates for Workers: Non-competes & Exempt Employee Compensation

Published: May 9, 2024

Dean Mead is monitoring recent initiatives predicted to reshape the landscape of employment. To minimize disruption and align with new requirements, employers should proactively engage with their HR partners and employment lawyers.

FTC Announces Rule Banning Non-competes … But will it stand?

On April 23, 2024, the Federal Trade Commission (FTC) announced a Final Rule (the “Rule”) prohibiting most employers from entering into or enforcing non-compete agreements with workers, subject to narrow exceptions. (Click HERE to review the Rule in its entirety.) Adoption of the Rule comes more than one year after the FTC first announced consideration of the proposed Rule and accepted comments. In over 500 pages, the FTC addresses the comments received and the basis for adoption of the Rule in its final form.


Proponents of non-compete agreements have argued that these clauses protect intellectual property and trade secrets; critics contend they restrict worker mobility and inhibit innovation.


Multiple parties have filed lawsuits in federal district courts challenging the Rule and the FTC’s authority to institute it. This includes an action filed on May 2 by the Chamber of Commerce of the United States along with other groups. The action asserts the FTC lacks the authority to issue Rules that regulate “unfair competition.” It is possible a court action will stay the effective date or enforcement of the Rule while the cases are decided. Many believe this could be a matter that heads to the U.S. Supreme Court.

Absent court action preventing it, the Rule is slated to become effective September 4, 2024. As of this date, the Rule prohibits employers from obtaining new non-competes except in limited circumstances, such as the sale of a business or interest in a business. In addition, employers will be required to notify employees that existing non-competes will not be enforced with the exception of senior executives (defined as a worker who earns more than $151,164 per year and is in a “policy-making position”, also defined in the Rule). There are some exceptions to the Rule’s application, such as non-profits.

Anticipate there will be much more discussion and shake up with respect to the Rule before it is set to go into effect on September 4, 2024.

A Shift in Compensation – Exempt Employees

The Department of Labor (DOL) has announced a substantial increase in the exempt employee threshold. The salary threshold will increase on July 1, 2024 from $35,568 annually to $43,888 annually. It will increase again on January 1, 2025 to $58,656. By making this change the DOL aims to ensure a greater number of employees receive fair compensation for their contributions with a focus on employees in salaried positions who may have previously been classified as exempt despite earning lower wages.

Exempt employees, as defined by the Fair Labor Standards Act (FLSA), are employees exempt from certain provisions governing minimum wage and overtime pay. To be considered, exempt employees must meet specific criteria delated to their job duties, responsibilities, and salary level.

These increases have been proposed several times in the past. The phased approach in the recent change escalating thresholds balances salary adjustments with a pragmatic approach to transition, allowing employers adequate time to adjust their compensation practices and budgetary allocations.

This could have significant cost implications and may affect classification of exempt employees, so it’s crucial to plan ahead.

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