As we approach the end of 2024, business owners find themselves reflecting on the past months while preparing for a successful new year. Alongside financial planning and strategy adjustments, this is also the perfect time to revisit key legal and regulatory updates that could affect your business in the coming year. Below are three areas business owners should consider as we enter this year-end season.
1. Reassessing Non-Compete Agreements
This past April, the Federal Trade Commission (“FTC”) voted 3-2 to ban non-compete agreements. This new rule invalidated existing non-compete agreements and prohibited employers, with some exceptions, from using non-compete agreements moving forward. This rule went into effect only a couple of months ago—on September 4, 2024. See generally 89 FR 38342-01.
However, whether this new rule will be enforced moving forward is up for debate. On August 20, 2024, a federal judge in Texas, Judge Ada Brown for the United States District Court for the Northern District of Texas, ruled that the FTC lacked the authority to enact broad rules establishing what is and what is not an unfair method of competition. Ryan, LLC v. Federal Trade Commission, No. 3:24-CV-00986-E, 2024 WL 3879954 (N.D.Tex. Aug. 20, 2024). This case is one of many challenging the FTC’s ruling on non-competes. Given the scope of the FTC’s ruling and the flurry of lawsuits following after, this issue may ultimately end up before the United States Supreme Court.
What does this mean for employers and business owners in the meantime? Non-compete agreements are often an important component of a business’s operations and ensure that a business has protection against theft of trade secrets and intellectual property. With these recent legal developments shifting how the courts approach non-compete agreements, now is the time to talk to a corporate lawyer or an intellectual property lawyer. Indeed, employers have new issues to tackle, including:
- How to best protect trade secrets and intellectual property in the absence of non-compete agreements;
- Whether existing non-compete agreements are likely to be upheld if challenged; and
- The best way to move forward in the wake of the FTC’s ruling.
2. Understanding New Federal Overtime Regulations
As of July 1, 2024, millions of additional workers became eligible for overtime compensation thanks to new regulatory changes implemented by the U.S. Department of Labor (“DOL”). Many more workers will become eligible for overtime compensation on January 1, 2025. That is because, though salaried employees are typically exempt from overtime compensation for working beyond the forty-hour workweek, salaried bona fide administrative, executive, or professional workers are eligible for overtime compensation if their salary falls below a set salary threshold.
Currently, white collar employees earning less than $844 per week, or less than $43,888 per year, must be paid overtime if they work more than forty hours in a given workweek. The DOL has already scheduled a follow-up increase in the salary threshold for January 1, 2025, and as of that date white collar employees earning less than $1,128 per week, or less than $58,656 per year are eligible for overtime if they work beyond the forty-hour workweek. Here’s a breakdown of these changes:
|
Date |
White Collar Salary Threshold |
|
July 1, 2024 |
$844 per week (equivalent to $43,888 per year) |
|
January 1, 2025 |
$1,128 per week (equivalent to $58,656 per year) |
29 C.F.R. § 541.600.
Now is a good time to review which employees might fall under the new thresholds. Adjustments may be needed in payroll budgets or employee work hours to manage the potential increase in overtime obligations. Being proactive in this area can help avoid potential penalties and ensure compliance. If you have questions, talk to one of our corporate lawyers or employment lawyers.
3. Corporate Transparency Act Compliance
The Corporate Transparency Act (“CTA”), aimed at preventing illicit financial activity, introduces new reporting requirements for many businesses. The CTA requires most corporations, LLCs, and similar entities to report beneficial ownership information (“BOI”) to the Financial Crimes Enforcement Network (“FinCEN”).
- Who Must File: Generally, most small and mid-size companies, except for those with specific exemptions (like certain large operating companies), will need to file under the CTA.
- Required Information: You’ll need to provide names, birthdates, addresses, and identification numbers for beneficial owners - individuals with significant control or ownership stakes in the business.
- Penalties for Non-Compliance: Failure to timely file a report may result in a $500 per day fine. A willful failure to file a report or a willful filing of false information may result in up to two years of imprisonment and a fine of up to $10,000.
The deadline for reporting your company’s BOI is December 31, 2024. 31 C.F.R. § 1010.380.
Here When You Need a Business Lawyer
Taking time to review these key areas now can provide your business with a strong footing for the new year. By assessing your non-compete agreements, staying ahead of new overtime regulations, and preparing for the CTA reporting requirements, you’ll be setting your business up to avoid legal pitfalls and capitalize on a fresh start come January.
If you’d like assistance navigating these areas, consider calling the business lawyers at Plakas Mannos at 330-455-6112 and scheduling a consultation today.
About the Authors
Gary Corroto is an attorney and partner for Plakas Mannos practicing law in various areas, including commercial litigation, energy, oil and gas, and more.
Tyler Speer recently joined us as a future associate attorney and has worked in various practice areas with Plakas Mannos as a law clerk, including personal injury, wrongful death, commercial litigation, corporate transactions and regulatory compliance, employment and workers’ compensation, and industrial injuries.
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