As we prepare to enter 2025, the regulatory outlook seems increasingly cloudy in three
key areas:
White Collar Salary Thresholds
On November 15, 2024, a Federal District Court in Texas invalidated the U.S. Department
of Labor’s April 2024 Final Rule increasing the salary thresholds necessary to qualify for
White Collar Overtime Exemptions under the Fair Labor Standards Act (“FLSA”). Prior to
the Final Rule, the last update to the salary threshold took place on January 1, 2020,
when it was increased from $455/week ($23,660/year) to $684/week ($35,568).
On April 23, the Department of Labor updated the salary threshold in multiple stages, as
follows:
- Effective July 1, 2024: $844/week, or $43,888 annually (using the current
methodology of pairing the salary threshold to the 20th percentile of weekly
earnings of full-time non-hourly workers in the lowest wage Census Region); - Effective January 1, 2025: $1,128/week, or $58,656 annually (established by
pairing the salary threshold to the 35th percentile of weekly earnings of full-time
non-hourly workers in the lowest wage Census Region); - Effective July 1, 2027, and every 3 years thereafter: the salary threshold would be
updated to reflect then current earnings data, using the 35th percentile of full-time
non-hourly workers in the lowest wage Census Region or such other methodology
then in effect.
The Texas Court’s recent ruling vacates the April 23 Final Rule nationwide – not just the
increase that was scheduled to take effect on January 1, but also the increase that already
took effect on July 1. As a result, the salary level threshold in effect prior to July 1, 2024
($684/week, $35,568/year) is restored. Further, the Final Rule’s provisions providing
increases in threshold salary levels every three years on an ongoing basis is vacated.
The Biden administration has appealed the Texas ruling, but that appeal will not be
decided before the Trump administration takes office. After the Obama Administration’s
attempt to significantly increase the White Collar Salary Threshold was enjoined
nationwide by a Texas Court after the 2016 presidential election, the first Trump
Administration’s Department of Labor ultimately promulgated a new rule establishing the
level that took effect on January 1, 2020 – an increase, but a lower increase than that
proposed by then-President Obama. It is possible that we could see a similar approach
during the second Trump Administration. In the meantime, employers may wish to hold
off on further changes related to the Final Rule, until we have some more clarity.
FTC Non-Compete Ban
As we reported in our August 26 Client Alert, a Texas court has also enjoined the Federal
Trade Commission’s regulation imposing a near total ban on non-compete agreements.
The FTC has filed an appeal of that ruling (as well as another injunction issued by a
Florida court that applies only to the plaintiff in that action). As with the appeals of the
FLSA White Collar Salary Thresholds, these appeals will not be resolved before the
Trump administration takes office in January.
As an independent regulatory agency, the FTC is not as immediately susceptible to
presidential influence as a cabinet agency like the Department of Labor. However,
President Trump is expected to have the opportunity to appoint a Republican majority to
the FTC early in his term. The new majority is expected to reevaluate many of the
regulatory initiatives undertaken by the Biden-appointed Commission.
National Labor Relations Board
President Trump is expected to fire the current NLRB General Counsel, Jennifer Abruzzo,
shortly after his inauguration. During her tenure, GC Abruzzo has pushed a significant
number of pro-union expansions of federal labor law, most notably an expansion of the
Board’s ability to certify a union without an election. The appointment of a conservative
General Counsel will have a noteworthy impact on the NLRB’s agenda.
However, due to the Senate’s unexpected failure to consider President Biden’s
nomination of Current NLRB Chair Lauren McFerran to a new five-year term – which
would cement a Democratic majority on the Board until August of 2026 – President Trump
may have the opportunity to appoint a Republican majority to the NLRB early in his term.
While there is still a chance that the Senate will confirm Chair McFerran to a new term
before President Biden leaves office, if it does not do so, we can expect a Republican
majority to begin implementing a more conservative path at the Board in 2025.
Conclusion
We will continue to monitor these regulatory developments and will issue updates
regarding any appeals in this matter.
If you have any questions about the impact these regulatory changes will have on your
business, please call our office. Thank you.
This client alert provides a general overview of new legal developments. It is not intended
to provide legal advice. If you have any questions or would like more information about
how these developments may affect your business, please contact us at (570) 341-8800.
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