Unions quickly celebrated actions on labor that the federal government took this week.
In one move, the Federal Trade Commission voted to ban noncompete agreements, which prevent millions of workers from taking a job at a competitor for a specific period of time. The FTC’s move, which is already being challenged in court, would mean that employees could apply for jobs that they weren’t previously eligible to seek.
In a second move, the Biden administration finalized a rule that will make millions more salaried workers eligible for overtime pay. The rule significantly raises the salary level that workers could earn and still qualify for overtime.
Teamsters, a national union, called the decisions "a big win for working families" on X, formerly known as Twitter. The message goes on to call the decisions "a big defeat for predatory corporations."
James Brant, the president of Teamsters Local 651, believes the changes are "wonderful for Kentucky workers."
"It puts power into workers' hands," Brant said. "It takes it out of companies' [hands] who are attempting and have monopolized."
"If you sign a clause with a certain company, you are agreeing that you're not going to go to their competitor and get a job for a length of time, or [within] a certain amount of miles," he added.
Brant believes that ultimately harms workers.
"They're in a dead-end job because they're making x amount of dollars," he said. "They could go to another company and make more to provide for their family, or they could go work on their own."
But with a non-compete, workers would be unable to do that. And according to the FTC, 30 million people — roughly one in five workers — are currently subject to non-competes.
FTC officials asserted that noncompete agreements harm workers by reducing their ability to switch jobs for higher pay, a step that often provides most workers with their biggest pay increases. By reducing overall churn in the job market, the agency argued, the measures also disadvantage workers who aren’t covered by them because fewer jobs become available as fewer people leave their positions. They can also hurt the economy overall by limiting the ability of other businesses to hire needed employees, the FTC said.
The rule, which doesn’t apply to workers at non-profits, is to take effect in four months unless it is blocked by legal challenges.
And legal challenges have already been filed.
The U.S. Chamber of Commerce filed a lawsuit against the FTC after the agency voted to ban employer noncompete agreements.
The Chamber of Commerce President, Suzanne Clark, called the FTC's decision "not only unlawful but also a blatant power grab that will undermine American businesses’ ability to remain competitive."
“Since its inception over 100 years ago, the FTC has never been granted the constitutional and statutory authority to write its own competition rules," Clark said in a statement. "Noncompete agreements are either upheld or dismissed under well-established state laws governing their use. Yet, [Tuesday], three unelected commissioners have unilaterally decided they have the authority to declare what’s a legitimate business decision and what’s not by moving to ban noncompete agreements in all sectors of the economy."
“This decision sets a dangerous precedent for government micromanagement of business and can harm employers, workers, and our economy," Clark added.
What is a noncompete agreement?
Noncompete agreements, which employers have deployed with greater frequency in recent years, limit an employee’s ability to jump ship for a rival company or start a competing business for a stated period of time. The idea is to prevent employees from taking a company’s trade secrets, job leads or sales relationships to a direct competitor, who could immediately capitalize on them.
Who is typically subject to these agreements?
People may assume that noncompete agreements apply only to high-level executives in the technology or finance industries. But many lower-level workers are subject to the restrictions as well. The rules vary by state.
How do I know if I'm subject to a noncompete?
People are sometimes surprised to learn that they’re bound by such an agreement. They might not even find out until after they’ve left for a new job, and their former employer intervenes and causes them to be fired.
Are trade secrets now likely to be spilled?
There are still laws on the books that protect companies’ trade secrets. The FTC decision doesn’t change that.
What about the new overtime rules?
Starting July 1, employers of all sizes will be required pay overtime — time and a half salary after 40 hours a week — to salaried workers who make less than $43,888 a year in certain executive, administrative and professional roles. That cap will then rise to $58,656 by the start of 2025. Previously, the cap was $35,568.
Who qualifies?
The Labor Department estimates that 4 million salaried workers who weren’t previously eligible will qualify. Some occupations, though, including teachers, doctors and lawyers are not eligible for overtime pay and thus are not affected by the change. And some states, like California and New York, already have salary thresholds that exceed the federal level.
What's the reaction so far?
Predictably, groups that represent companies have lined up against the new rule. Conversely, worker groups are applauding it as a necessary and long-overdue change.
The National Retail Federation argued that the new rules “curtail retailers’ ability to offer the most flexible, generous and tailored benefits packages to lower-level exempt employees across the industry.”
It also asserted that the new rules don’t give employers adequate time to make the changes needed. And it complained that the inclusion of automatic increases “exceeds the Department’s legal authority and oversteps longstanding Fair Labor Standards Act and Administrative Procedure Act principles.”
On the social media site X, the AFL-CIO labor organization said the rules will “restore and extend overtime protections for hard-working Americans.”
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The Associated Press contributed to this report.
