Some Non-Competes Invalidated, Final OT Rule, and Net Neutrality is Back

[Gene Marks, host]

Hey everybody, it's Gene Marks, and welcome to this week's episode of the Paychex THRIVE Week in Review podcast. This is where we pick out a few, news stories that happened during the week and how they affect your business and my business, as well.

This week there were like three big stories. Sometimes we do this and, you know, we have to scrape a little bit to come out with, to talk about some stories, but not this week at all. There are three big stories coming out of Washington that I want to talk about because they all have significant impact on your on your businesses. So, let's get started, shall we?

The first and biggest news, I think, comes the Federal Trade Commission, the FTC. Based on a 3-to-2 vote, the FTC has voted to invalidate – to make irrelevant – going forward, non-compete agreements. If you have any non-compete agreements with your, you know, employees, they are soon going to be invalidated.

Now, according to the FTC, their news release: FTC Chair Lina Khan says, “non-compete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once non-competes are banned.”

There are some, right now, business groups that are suing the FTC for this rule but let me just make sure you know what you’ve got to know. Number one, the rule still has to be published in the Federal Register. It should happen very shortly, maybe by the time this this recording gets published, and then it's a four-month, timetable. Four months until it becomes effective, okay?

If you have anybody that's earning more than $151,000 in change, those … they're still, those non-competes will still be valid for these people forever. They're going to be grandfathered in. But if you hire anybody new, regardless of what they make after four months, those non-competes, you won't be able to do a non-compete with them.

The same thing with any other employee that’s earning less than $151,000. Their non-competes are invalid four months from when this gets filed with the Federal Register, and you're looking in the September time frame. I'm sure we'll be revisiting this more in depth, as well.

But the FTC says that non-compete agreements are going away. By the way, a little bit of a protection for yourself: Now that you know these non-competes are going away – and by the way, there are some exclusions, like non-profits and people in the banking industry – but now that you know most of them are going away, what's not been excluded is confidentiality agreements and non-disclosure agreements (NDAs). Beef those up. That's what a lot of my clients are doing right now.

So, even though you can't have a non-compete, somebody can go across the street and work with a competitor. You need to beef up your NDAs and confidentiality agreements or get them signed by your employees. So, even if they do work for a competitor, you can still hold them liable if they give up any of your proprietary information. So, that's the first bit of news that happened this past week.

The second bit of news is that the white House has finalized their overtime pay rule. That also happened last week, as well. That should go into effect by July 1. Sorry, it's going to go into effect Jan. 1 of 2025, and then it's going to continue on after that. So, let's make sure that we understand – wait, wait, wait, I’ve got to go back on this. Sorry, guys. I want to make sure I give you the right information.

On July 1, 2024 – this coming July – the overtime threshold is going to increase to $43,888 and then on July, on Jan. 1, 2025, that overtime threshold goes up to $58,656.

What does that mean? It means this: Right now, the overtime threshold is about $35,000, okay, around that number. If you have anybody that's salaried and not supervising people and have certain titles and certain responsibilities, then making more than $35,000, you have to pay them overtime. Well, effective July 1, you will have to pay them overtime – those same people, if they're making as little as $43,888. And on Jan. 1, 2025, you'll have to pay people overtime if they're making as much as $58,656. Everything below that, below that number. So, that's a big impact on your business.

So, what do you do? You need to get together with your HR expert or your labor attorney, people from Paychex or whoever you're getting to advise you on your HR, and you need to look at all the workers that fall into this category. And again, it's generally people that are salaried, not supervising people, have certain titles and certain job descriptions. You need to make that list, and you need to see what they're making, and you need to prepare for the fact that if they're going to be making more than these levels, or up to those levels starting in July of this year and then January of 2025, you're going to have to pay these people overtime, or institute a zero tolerance, you know, overtime rule.

But the bottom line is that's been approved this past week and that's going to become effective very, very soon.

The last bit of news that impacts all of our business comes from the Federal Communications Corp, the FCC. They are bringing back net neutrality. According to this report on NPR, the Federal Communications Commission voted 3 to 2 last week to reclassify broadband as a public utility, such as water and electricity, which will regulate access to the internet. So, now the government can regulate this.

This favors small businesses or individuals that, you know, might be jammed up on the internet because bigger companies and bigger providers, bigger needers of broadband space are getting the priority from the internet service providers.

Well, no more. Now those internet service providers have got to give everybody equal access, which means that it could have an impact on our streaming, for example. It might be less streaming or worse streaming because more people are now getting access to the same broadband that the Netflixes of the world were getting, you know, getting access to.

So, is this good for overall business? I mean, again, for the businesses that paid for more internet and had more of a demand, they were enjoying this stuff. And now, suddenly, they're going to be competing against much smaller businesses that aren't paying as much for the internet, but they still deserve equal access because now the internet will be like regulated like a utility, like water and electricity. So, that's new news from the FCC, and yeah, you can expect some lawsuits about that, as well.

In fact, let me tell you guys, you can expect lawsuits about all these things. The FTC already, you know, the non-compete rule lawsuits are pending. There will be lawsuits on the new Department of Labor's, and White House overtime rule because there were lawsuits a few years ago in the when the government tried to increase the overtime wages. And this FCC rule on net neutrality, you can expect lawsuits on that as well, which could delay things, suspend things, even go all the way to the Supreme Court.

And depending on how the, you know, the elections go this November, you know, if the administrations turn over, it could very well lead to nonstarters with some of these rules, because these are just rules. They're not exactly laws, so, a lot of these agencies might be told by a new president; stop pursuing these rules, we're going to change these rules back to the way that they were. So, just be aware of them.

Hey, thanks for watching and listening. My name is Gene Marks. You have been watching and listening to the Paychex THRIVE Week in Review. If you'd like more advice and tips, help in running your business, please visit us and get our newsletter at paychex.com/thrive.

Otherwise, I will see you again next week with more news that impacts your company. Look forward to seeing you then. Take care.

This podcast is property of Paychex, Inc. 2024. All rights reserved.