FTC banning non-competes; DOL to update overtime rules

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Updated May 8, 2024
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The Federal Trade Commission (FTC) and Department of Labor (DOL) recently issued two Final Rule documents that could have an impact on independent aftermarket and dealer operations. 

The FTC announced on April 23 a Final Rule that effectively bans new non-competes for all workers, including senior executives, that would take effect 120 days after its publication in the Federal Register. 

The FTR states non-competes are "an unfair method of competition — and therefore a violation of section 5" of the FTC Act. Under the terms of the Final Rule, the states FTC non-competes already in place for senior executives may remain in place, while existing non-competes with other workers "are not enforceable after the effective date."

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In its Final Rule fact sheet, the FTC states fewer than 1% of workers are estimated to be senior executives under the final rule, and the rule defines a senior executive as "workers earning more than $151,164 annually who are in a 'policy-making position.'"

The commission also estimates banning noncompetes will result in a 2.7% increase in the rate of new businesses formed and $400-$800 billion in increased wages for workers over the next decade, among other benefits.

The National Association of Wholesale Distributors (NAW) spoke out against the non-compete ban. 

"Wholesaler-distributors utilize non-compete clauses in responsible, narrow, and targeted ways. Typically, they utilize them for highly compensated employees to protect proprietary information including sales data, relationships with vendors and customers, company strategy, and other nonpublic information essential to their business," NAW wrote. "Wholesaler-distributors do not take advantage of their employees; indeed, the industry typically has high effective tax rates and low profit margins yet pays wages above those earned by the average private sector worker; and offers generous benefits including healthcare, retirement, paid family leave, and paid sick leave."

The Department of Labor (DOL) also announced last month updated overtime rules under the Fair Labor Standards Act (FLSA). 

According to the DOL, the new Final Rule updates and revises the regulations issued under FLSA implementing the exemption from minimum wage and overtime pay requirements for executive, administrative and professional (EAP) employees.

DOL states "revisions include increases to the standard salary level and the highly compensated employee total annual compensation threshold, and a mechanism that provides for the timely and efficient updating of these earnings thresholds to reflect current earnings data."

The Final Rule, which will take effect on July 1, will increase the standard salary level and the highly compensated employee total annual compensation threshold on the rule’s effective date, and again on Jan. 1, 2025, when changes in the methodologies used to calculate these levels become applicable. The rule also provides for future updates of these levels every three years to reflect current earnings data, DOL states.

The new scheduled increases are as follows:

DOL new overtime rulesNew employee compensation thresholds from the Department of Labor, effective July 1, 2024.Department of Labor

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