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Significant Labor and Employment Developments:  Noncompetes, Overtime, Pregnant Workers Fairness Act

The last few weeks have brought substantial nationwide developments in the ever-changing labor and employment space.  The Federal Trade Commission (FTC) voted to finalize a rule banning most non-compete agreements.  The United States Department of Labor (DOL) finalized a rule updating the salary test for workers exempt from overtime.  And the Equal Employment Opportunity Commission (EEOC) published its long-awaited rule implementing the Pregnant Workers Fairness Act (PWFA).  A more detailed discussion of each is below.

Noncompete Agreements Banned

FTC voted 3-2 on April 23 to finalize a sweeping rule prohibiting new noncompete agreements with workers of any kind.  The ban will take effect 120 days after the rule is published in the Federal Register (i.e., around Labor Day).  Existing noncompetes for most workers will also be invalid that same day—and employers must provide each affected employee/former employee with notice that they are unenforceable (formal rescission is not required).  Existing noncompetes for senior executives will remain enforceable (but no new ones may be entered).  Trade secrets will continue to be able to protected through less restrictive agreements and existing trade secret law.  There are exceptions for noncompetes entered related to the “bona fide sale” of a business and between franchisors and franchisees.

At least two lawsuits have been filed over the rule; they may result in delays to the rule’s effective date or it being enjoined and not taking effect.

Overtime Rule Released

DOL released a rule on April 11 making significant changes to overtime requirements for many salaried workers.  The rule will go in effect on July 1 and immediately increase the threshold under which “white collar” salaried workers must be paid overtime (time and a half) from $35,568 per year ($684 per week) to $43,888 per year ($844 per week).  That threshold will then increase dramatically to $58,656 per year ($1,128 per week) on January 1, 2025.  The rule simultaneously increases the salary threshold for “highly compensated employees” (who are typically not entitled to overtime pay) from $107,432 to $132,964 on July 1; and to $151,164 on January 1, 2025.  The rule also provides for the salary thresholds to increase every three years (starting July 1, 2027).  Multiple lawsuits, including from Associated Builders and Contractors, are being considered over the rule, which if filed and successful may delay or enjoin it.

Pregnant Workers Fairness Act Regulations Finalized

EEOC published its final rule implementing the PWFA on April 19; it will take effect on June 18.  The PWFA requires most employers to make reasonable accommodations for known limitations of employees or job applicants related to, affected by, or arising out of “pregnancy, childbirth, or related medical conditions,” unless doing so would cause undue hardship for business operations.  Significantly, EEOC has interpreted PWFA to mean that when an employer is made aware of a limitation it must provide a reasonable accommodation even if the affected person temporarily cannot perform one or more essential functions of the job.  Reasonable accommodations could include, among other things, frequent breaks, schedule changes, telework, or temporary suspension of essential job functions.

EEOC also included “having or choosing not to have an abortion” in the definition of “pregnancy, childbirth, or related medical conditions.”  Seventeen state attorneys general recently filed suit over this inclusion, which could result in an injunction preventing enforcement of related parts of the rule.  One court has already enjoined the PWFA from being enforced against the State of Texas, holding that Congress violated the Constitution by failing to have a quorum before passing the bill.  Future lawsuits with similar theories brought by other plaintiffs are possible.

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Liff, Walsh and SimmonsLabor and Employment Group continually tracks labor and employment developments that may impact you or your business.  For questions please contact Dave Dorey, partner and head of the Group.

This alert provides general information and is not a full analysis of the matters discussed.  It may not be relied on as legal advice.  Dave Dorey, a Liff, Walsh & Simmons partner licensed to practice law in Maryland, the District of Columbia, Virginia, and California, contributed to the content of this alert.

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Dave Dorey

Dave Dorey is a Partner with Liff, Walsh & Simmons serving as Director of the Labor & Employment practice group, and member of the Litigation practice group. Dave has more than a dozen years of experience in complex labor and employment and litigation matters. He is a trusted counselor who has served in high-profile Senior Counsel and Chief of Staff positions in the federal government, including as Counsel to the Solicitor of the United States Department of Labor. He also has significant experience representing both employers and employees in labor and employment counseling and litigation.

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