FINAL RULES ISSUED BY U.S. DEPARTMENT OF LABOR AND FEDERAL TRADE COMMISSION

On April 23rd, 2024, the U.S Department of Labor (“DOL”) and the Federal Trade Commission (“FTC”) announced issuance of Final Rules that impact the employment landscape.

DOL’s Final Rule

The DOL’s Final Rule, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees, revises and updates the regulations issued under Section 13(a)(1) of the Fair Labor Standards Act (“FLSA”) implementing the exemptions from minimum wage and overtime pay requirements for executive, administrative and professional (“EAP”) employees. Significant revisions include increases to the standard salary level for overtime eligibility, increases to the highly compensated employee total annual compensation threshold, and the inclusion of a mechanism that provides for updates of the salary and compensation thresholds every three years. In addition, the Final Rule provides guidance for employers on how to pay employees for overtime hours. Effective July 1, 2024, the new standard salary threshold for EAP employees to qualify for “exempt” status will increase from $684 ($35,568 per year) to $844 ($43,888 per year) per week, and effective on January 1, 2025, the standard salary threshold will increase to $1,128 per week ($58,656 per year).

The threshold for the “highly compensated employee” exemption will increase from $107,432 to $132,964 on July 1, 2024, and to $151,164 on January 1, 2025. This threshold will also be updated every three years.

However, please note that the Final Rule does not change the standard salary threshold for Puerto Rico and other U.S. Territories (Guam, the U.S. Virgin Islands, and the Northern Mariana Islands). As stated in last week’s Final Rule, the DOL “[w]ill address these aspects of its proposal in a future final rule.” Therefore, the standard salary threshold to qualify as exempt EAP employee remains at $455 per week for Puerto Rico.

FTC’s Final Rule

Also last week the FTC issued the Non-Compete Clause Final Rule which establishes that non- compete clauses constitute an unfair method of competition and a violation to Section 5 of the Federal Trade Commission Act (“FTC Act”), as amended, and thus employers will be unable to require any such agreement in the future.

However, with respect to the existing non-compete agreements, entered before the effective date, the Final Rule adopts a different approach between those involving senior executives, defined as a “worker earning more than $151,164 who are in a policy-making position,” and those involving workers other than senior executives. The Final Rule becomes effective 120 days after being published in the Federal Register.

For senior executives, the rule permits existing non-compete agreements to remain in force but after the effective date, companies and individuals are prohibited from entering into new non- compete agreements with senior executives. On the other hand, for non-competes involving other workers or employees who are not considered senior executives, existing non-competes are no longer enforceable after the effective date. Employers must provide such workers with existing non-compete agreements a notice of non-enforcement by the effective date.

The implementation of this Non-Compete Clause Final Rule and the regulatory landscape surrounding non-compete agreements is undergoing significant changes. While there is 4-month period for the Final Rule to become effective, we anticipate that in the meantime this Final Rule will be subject to immediate legal challenge and injunction efforts, including on the grounds of whether the FTC has legal authority to promulgate such a rule nationwide.

If you have any questions or comments regarding these recent developments that impact the employment landscape or if you’d like assistance to revise or modify your practices and policies to ensure compliance with local legislation, please contact any of the following attorneys from our Labor & Employment Practice Group at your convenience:

Juan J. Casillas Ayala	787-523-3439	jcasillas@cstlawpr.com
Luis F. Llach Zúñiga	787-523-3496	lllach@cstlawpr.com
Israel Fernández Rodríguez	787-523-3437	ifernandez@cstlawpr.com
Luis R. Ramos Cartagena	787-523-3483	lramos@cstlawpr.com
Juan C. Nieves González	787-523-3478	jnieves@cstlawpr.com
Natalia E. del Nido Rodríguez	787-523-3481	ndelnido@cstlawpr.com
Cristina B. Fernández Niggemann	787-523-6076	cfernandez@cstlawpr.com