Apr 25, 2024 - Business

Federal regulators just passed two new worker-friendly rules

Illustration of a worker wearing an apron with a name tag shaped like a flexed arm.

Illustration: Annelise Capossela/Axios

It's been a big week for U.S. workers, courtesy of regulators at the Federal Trade Commission and Department of Labor.

What happened: The FTC banned noncompete agreements and the Labor Department expanded its rule on when employees are owed overtime.

Why it matters: Their actions, along with the recent flurry of union activity and a still-tight labor market, are helping swing the balance of power between capital and labor in the U.S. closer to workers

  • Yes, but: Big legal hurdles could keep these new rules from taking effect.

The big picture: There's an inherent imbalance of power between employers and the individual workers who serve at their discretion — and regulation is one way to adjust for that.

  • Along with its big support for unions, regulations like these are part of the White House's attempt to pull power to labor's side.
  • Administrations looking to favor employers, on the other hand, are less apt to pass new or updated regulations, and more likely to rule by benign neglect — say by lax enforcement of certain rules.

State of play: On Tuesday, the FTC banned noncompete agreements — which prevent employees from taking jobs with their employer's competitors for a certain period. It was the first time in a half-century the agency mandated an "economy-wide" change, as the WSJ pointed out.

  • The rule is meant to take effect in August — and if that happens, it would make it easier for workers to job-hop and, the agency says, could lead to higher wages.

Reality check: On Wednesday, as expected, business groups filed a lawsuit in Texas federal court to stop the noncompete rule from taking effect.

  • Observers think the suit is likely to succeed —  the judge who will hear the case, J. Campbell Barker, has overturned other actions from Biden federal agencies, including the COVID-era eviction moratorium and banking regulations around race discrimination.
  • The Trump nominee is the "go-to judge for litigation against the power and reach of the administrative state," Bloomberg Law recently noted.
  • And any appeals will land at a conservative Supreme Court that's been fairly hostile to regulations.

Meanwhile: The Department of Labor's rule change about overtime pay could mean raises for millions of workers.

How it works: Right now employers must pay employees time-and-a-half if they work more than 40 hours a week.

  • But if a worker is paid a salary over a certain minimum threshold and primarily performs executive or professional duties, they don't qualify for overtime pay.
  • Currently, that minimum salary is $35,568 a year. The new rule would bump it up to $43,888 on July 1, and then to $58,656 in 2025.
  • The final rule would benefit 4.3 million workers, more than half of them women, per an estimate from the progressive Economic Policy Institute. It could result in a transfer of $1.5 billion in pay annually from employers to workers.

Between the lines: It's likely the overtime rule will also be challenged, but the chances that the first increase overcomes that challenge are pretty good, says Brett Coburn, an employment attorney at Alston & Bird.

  • Businesses have a few options for dealing with the new rule: Give managers raises to get them over the threshold, start paying overtime, or curb worker hours.
  • It's a win-win for employees, whatever they choose, says Heidi Shierholz, president of the Economic Policy Institute, who worked on the Obama administration's ultimately failed efforts to raise the overtime threshold. "Workers will either get higher pay or they'll get their time back."
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