Employers should be preparing for several significant payroll and policy deadlines this summer that are required by new federal employment rules and regulations:

1. Salaried employees must make a minimum salary of $43,888 annually beginning Monday, July 1, 2024. On January 1, 2025, that annual salary minimum threshold increases to $58,656. Only 10% of that annual salary can be paid in nondiscretionary bonuses or commissions.
2. Noncompete clauses in almost all employment and severance contracts are scheduled to be banned on the deadline of September 4, 2024.
3. Pregnant workers and women giving or returning from childbirth have to be reasonably accommodated, including being given individualized maternity leaves, under the broad final regulations as of a deadline last week (June 18, 2024).

Salary Minimum Increases

Employers cannot legally just pay employees on salary because it is convenient for the employer or the employee. Under the Fair Labor Standards Act, which applies to virtually all businesses, employees must receive hourly pay and overtime pay unless (1) the duties performed by that employee fit into one of the narrow white-collar exemptions; and (2) that employee also makes at least the amount required by the FLSA salary minimum threshold.

Since 2019, that salary minimum threshold has been $35,568 annually. But the regulations have been amended so that salaried employees must make at least $43,888 beginning next week. While court cases have been filed to try to stop this change from taking effect, no court has entered an injunction yet. That means that companies are out of time to resist this change. Therefore, as an employer, you need to double-check that your salaried employees are earning enough ($844 per week) to meet this salary minimum as of next Monday.

While you are at it, double-check whether your salaried employees are also actually performing the duties that allow you to pay them as an executive, a professional, an administrator, a computer specialist or outside salesperson (outside salespeople don’t have to meet the salary minimum but do have a duties test). If the employee doesn’t meet the duties test for their position to be exempt, you cannot pay that person on salary even if the employee is paid the salary minimum threshold amount.

Noncompete Contracts Ban

In April 2024, the Federal Trade Commission finalized a rule banning almost all employers (banks, credit unions, nonprofits and airlines excepted) from entering into, enforcing or attempting to enforce noncompetition clauses with employees. The rule goes into effect on September 4, 2024.

The FTC says that noncompete agreements suppress wages and block workers from pursuing better jobs. Employers like noncompetes because they prevent competitors from poaching talent and protects trade secrets and client relationships. But the FTC is siding with the free market and employees who want the opportunity to take their talents anywhere they please.

In addition to banning employers from entering into new noncompete agreements with employees, from enforcing noncompete agreements signed in the past, and from threatening to enforce existing noncompetes against departing employees, the new rule also requires employers to send out notices (FTC provided a model notice) by the deadline to current and former employees telling them that their noncompetition agreements are no longer in effect and won’t be enforced.

Employers will need time to get those notices out, but most experts are advising businesses to wait to see if the various lawsuits filed to stop this rule effectively halt its enforcement before the September deadline. My advice is for employers to at least get contact information together for any current or former employee who may need to receive the notice. But don’t send the notice until the end of the summer, when we will know more about whether the rule has been enjoined.

More importantly, I recommend that employers seriously consider other workplace changes that they can undertake to discourage employees from leaving the company and going into competition with the employer. Of course, that primarily means that your salaries and benefits must stay competitive with others in your industry. But that also means you need to take a hard look at giving valuable employees other perks that they  want—flexibility (such as remote work), work/life balance, a fun culture that employees want to be a part of, great supervisors who believe in, encourage and reward their direct reports, and the training, mentorship and development for the employee to grow and progress at the company. Few employees will want to leave a company that actually embraces this kind of retention strategy.

Implementing the Pregnant Workers Fairness Act

The EEOC’s final regulations governing the Pregnant Workers Fairness Act took effect last week (June 18, 2024) and obligate employers with 15 or more employees to reasonably accommodate a pregnant worker or one who just gave birth to a child. Since that deadline, you are required to treat pregnant employees and new moms differently, even better, than other employees if that is what it takes to reasonably accommodate them.

The categories of “pregnancy, childbirth or related conditions” are quite broad, and obviously include pregnancy and childbirth, but also miscarriage, infertility, lactation, postpartum depression, endometriosis, gestational diabetes, and other complications to reproduction, pregnancy or childbirth.

The PWFA requires employers to temporarily change the work environment or how things are usually done to reasonably accommodate any known physical or mental limitations of pregnancy, childbirth or related medical conditions. These accommodations may include schedule changes, frequent breaks, voluntary leave, remote work, light duty, job restructuring, policy changes, modifications of uniforms, equipment or procedures, or even temporary suspension of essential job duties.

One of the biggest changes is that you can no longer have a maternity leave policy that just rigidly states that an employee can be gone for six or eight weeks after childbirth. You are going to have to individualize the maternity leave time based on the employee’s personal medical needs. Sit down before the birth with every expectant mother and work out a plan for returning to work, but be ready to be flexible if the birth or recovery creates any documented medical issues.