Federal rule spares territories - for the time being

On April 23, the U.S. Department of Labor issued the final overtime rule, as announced in August last year. The move may again attract legal action.

The rule raises salaries for overtime exemptions under the Fair Labor Standards Act, as well as affecting salaries of “highly compensated employees,” a separate category.

However, the final rule does not include the U.S. territories.

U.S. DOL said in its executive summary, “The department is not finalizing its proposal to apply the standard salary level to the U.S. territories subject to the federal minimum wage and to update the special salary levels for American Samoa and the motion picture industry.”

The four U.S. territories are Guam, the Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands.

U.S. DOL said, “The department will address these aspects of its proposal in a future final rule.”

Effective July 1, the rule increases the standard salary threshold from $684 per week ($35,568 per year) to $844 per week ($43,888 per year. Effective Jan. 1, 2025, the standard level will increase again to $1,128 per week ($58,656 per year.)

The final rule automatically increases the executive, administrative and professional salary threshold every year from July 1, 2027.

The two most recent attempts to increase salary thresholds were challenged in court and expectations are that this rule will be challenged as well. Previous challenges were upheld.

Guam and other jurisdictions previously received an exemption to the final rule.

It’s official - no more non-compete agreements

That same day, the Federal Trade Commission issued a final rule to “promote competition by banning noncompetes nationwide, protecting the fundamental freedom of workers to change jobs, increasing innovation, and fostering new business formation.

Lina M. Khan, chairwoman of the FTC said, “Noncompete 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 noncompetes are banned.

“The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market,” she said.

In a release, the FTC said it “estimates that the final rule banning noncompetes will lead to new business formation growing by 2.7% per year, resulting in more than 8,500 additional new businesses created each year.

The final rule is expected to result in higher earnings for workers, with estimated earnings increasing for the average worker by an additional $524 per year, and it is expected to lower health care costs by up to $194 billion over the next decade. In addition, the final rule is expected to help drive innovation, leading to an estimated average increase of 17,000 to 29,000 more patents each year for the next 10 years under the final rule.”

According to anecdotal evidence, some companies in Guam have endeavored to have employees sign non-compete agreements. Guam law addresses non-competes in 18 Guam Code Annotated § 11305 (b).