At a Glance

• Although whether the FTC Rule will in fact go into effect on a national scale remains uncertain, employers should be aware of increasing judicial scrutiny of restrictive covenants.
• DOL is significantly increasing the minimum salary for certain employees to be properly classified as exempt from federal overtime requirements.
• Federal contractors should immediately review the 2024 Corporate Scheduling Announcement List, as it is the only advance notification to select contractors of upcoming audits.

We provide insurers five key takeaways from recent employment caselaw and regulation, on topics including the possible banning of noncompete agreements, federal and state minimum salary increases for exempt employees, upcoming audits of federal contractors, the NLRB’s questioned ability to obtain injunctions from federal district courts, and a list of the most significant state legislative and regulatory developments in the first half of 2024.

1. One Court Blocks and Another Affirms FTC Rule Banning Employment Noncompetes; National Labor Relations Board Also Issues Decision Addressing Noncompetes

On April 23, 2024, the U.S. Federal Trade Commission issued its final rule (FTC Rule), banning essentially all employment noncompete agreements nationwide effective September 4, 2024. The FTC Rule faced scrutiny and multiple legal challenges immediately upon publication; and although whether the FTC Rule will in fact go into effect on a national scale remains uncertain, employers should be aware of increasing judicial scrutiny of restrictive covenants.

On July 3, 2024, the U.S. District Court for the Northern District of Texas issued a memorandum opinion and order that enjoined the FTC from implementing or enforcing the FTC Rule against the plaintiffs in Ryan LLC v. Federal Trade Commission. Although the preliminary injunction applies only to the plaintiffs in the Ryan action, the Ryan court’s decision casts serious doubt on whether the FTC Rule will ever go into effect, with the Ryan court promising a final decision — which may or may not include a nationwide injunction — on or before August 30, 2024, meaning the decision could be issued less than a week before the FTC Rule is scheduled to take effect.

On July 23, 2024, the U.S. District Court for the Eastern District of Pennsylvania issued a memorandum opinion and order affirming enforceability of the FTC Rule in ATS Tree Services, LLC v. Federal Trade Commission. The ATS court found that the plaintiff employer had failed to establish irreparable harm sufficient to justify imposition of injunctive relief and that, even if the plaintiff employer could show irreparable harm, injunctive relief would still be inappropriate because the plaintiff was unlikely to prevail on its argument that the FTC did not have authority to promulgate the FTC Rule.

While it is possible the FTC may postpone the September 4 enforcement date of the FTC Rule in light of the court developments, there has been no indication as of yet from the FTC that it will do so. 

Additionally, in June, an administrative law judge of the National Labor Relations Board (NLRB) joined a growing number of agencies across the U.S. condemning the use of restrictive covenants, in J.O. Mory, Inc. This decision represented the shift the NLRB has been taking in how it views noncompete agreements and employee nonsolicitation agreements with respect to employees’ Section 7 rights under the National Labor Relations Act (NLRA).

2. DOL Publishes New Minimum Salary Thresholds for Exempt Employees Effective July 1, 2024, and Increasing Again January 1, 2025

The U.S. Department of Labor (DOL) issued its final rule in April, which significantly increases the salary threshold requirement for certain professional employees to be properly classified as exempt from federal overtime requirements under the Fair Labor Standards Act (FLSA). The previous threshold was $684 per week ($35,568 per year). Effective July 1, 2024, the threshold salary level for executive, administrative and professional exempt employees under the FLSA increased to $844 per week ($43,888 per year). This threshold salary is scheduled to automatically increase to $1,128 per week ($58,656 per year) as of January 1, 2025. The final rule also raised the annualized salary threshold for employees to qualify under the “highly compensated employee” exemption, increasing the threshold from $107,432 to $132,964. This threshold is scheduled to increase to $151,164 on January 1, 2025.

3. OFCCP’s First 2024 Pre-Audit Corporate Scheduling Announcement List Released 

On June 7, the Office of Federal Contract Compliance Programs (OFCCP) released its first 2024 Corporate Scheduling Announcement List (CSAL). The CSAL notifies 500 supply and service establishments (locations) of upcoming audits. Federal contractors should immediately review the 2024 CSAL, as it is the only advance notification to select contractors of upcoming audits. Please visit our update and the Faegre Drinker LaborSphere blog for more information on the OFCCP and CSAL.

4. SCOTUS and the NLRB: Standards to Obtain Injunctions

In June, SCOTUS ordered that the NLRB must meet the same standard as every other litigant to obtain injunctions from federal district courts. While this decision has been seen as a handicap to the NLRB’s authority, SCOTUS instead sought to standardize a circuit split, recognizing (as other courts have) that there is no language in the National Labor Relations Act that grants the NLRB special access to the powerful tool of preliminary injunctions. For more information on this decision, please see our full update. Further information also can be found at this link. 

5. State Employment Law Developments in Q1 and Q2

Faegre Drinker published a list of the most significant legislative and regulatory developments in the first half of 2024. These include California’s new workplace violence prevention plan requirements and New York’s exempt employee salary threshold increase, effective January 1, 2024. Please see the full updates for Q1 and Q2.