What the election means for stalled non-compete and overtime rules

THis year saw the implementation of not one, but two major labor law rules—one banning non-compete agreements for most workers, another expanding employees’ overtime rights—only for both to stall in the courts before fully taking effect. But whether Kamala Harris or Donald Trump wins on Tuesday will likely have no immediate impact on either; In the long run, elections will ultimately have consequences.

In April, the Federal Trade Commission voted to approve a landmark rule that would ban most new noncompete agreements, but it was immediately met with lawsuits that prevented its implementation. That same month, the U.S. Department of Labor issued a final rule raising the wage threshold at which employees may be exempt from overtime pay. It has partially taken effect, but it has also been blocked by legal challenges that could prevent a larger rate increase on January 1.

In the short term, whoever wins the election will not be able to clear the legal hurdles both measures face. And even if the lawsuits fail, it may take time for the fate of each to be known. There hasn’t been much talk about legislative activity on either issue.

“If the 119th Congress does not support a new administration, we will find ourselves in divided government and federal legislative gridlock for the next four years,” says Shannon Mead, executive director of the law firm Littler Mendelson’s Workplace Policy Institute.

The fate of the non-compete clause appears a little clearer. “Many people felt that the FTC had shortchanged them too much by issuing the rule that they did,” says James A. Paretti Jr., Littler’s lawyer and former EEOC senior counsel. “Non-competitors are older than the United States. They literally came with English common law.”

While numerous lawsuits have been filed against the ban, it’s worth keeping an eye on what’s happening in Texas, says Seyfarth Shaw attorney Michael Wexler. In August, a Federal District Court judge “mandated” or prohibited the new rule from being implemented nationwide; The Federal Trade Commission appealed the decision last month. The next time the case will be heard (probably in 2025) The 5th Circuit, which by all accounts is particularly business-friendly and unlikely to seek to expand the powers of the federal government.

If the Trump or Harris administration upholds the lower court’s decision, as expected, it will have to decide whether it wants to appeal the decision by taking the case to the Supreme Court, which has already shown it is unlikely to uphold greater government powers. Trump’s FTC could reject the appeal and uphold the district court’s decision, but it could also decide it wants the Supreme Court to have the final say on the issue, Wexler says. And while one would expect the Harris FTC to appeal the decision, leading to a Supreme Court hearing, it could also overturn it. “Who’s to say Harris isn’t potentially more business-friendly than Biden? We don’t know,” says Wexler.

However, all signs point to the ban not moving forward. That’s “very unlikely, either legally or politically—take your pick,” Wexler says. “The machinations around this may vary a little depending on who wins, but I think ultimately, one way or another, the ban just won’t go into effect.”

Meanwhile, on the overtime rule, a decision from another Texas district court is expected before the end of the year, as employers must implement the rule on January 1. (The salary threshold for overtime exemption increased to $43,888 in July. An additional increase to $58,656 effective Jan. 1 is the measure being discussed.) A judge has already blocked the rule for Texas state employees, and the decision “showed his point” to this rule in general,” says Noah. Finkel, who co-chairs the Wage and Hour Litigation Group at Seyfarth Shaw. “There are many reasons to expect that a judge will ultimately block this rule nationwide.”

If an unforeseen circumstance occurs and a judge does not block the rule and it takes effect on January 1, Finkel says, the new Trump administration will not be able to completely repeal the rule; to create a new one, it would have to go through a rulemaking process. “At that point, they can’t just wave a wand and get rid of it,” Finkel says. Meanwhile, employers have already put the raises in place, and Finkel notes that rolling back the raises could “become a political bridge that he may not cross,” he says. “From a practical point of view, if this rule is not enshrined, then, in my opinion, it will be implemented.”

In the much more likely scenario that the court blocks the rule, a Trump victory would mean “the rule is likely dead,” Finkel says, and any late appeal by the outgoing Biden administration would likely be rejected. If Harris wins, her Department of Labor will likely appeal the decision, taking it to the business-friendly 5th Circuit and possibly the Supreme Court.

But even this doesn’t mean it’s over. The Harris administration’s appeal has at least some chance of success, Finkel says, because even if the 5th Circuit is considered business-friendly, in a recent case it still decided that the Department of Labor has the power to set a minimum wage for overtime work. . exceptions, which sets a precedent. “Yes, the Fifth Circuit is leery of business regulation, and the Supreme Court is increasingly leery of it,” Finkel says. But the decision in the recent case “gives the Harris DOL more optimism than before,” he says.

It’s a reminder that even if no laws change immediately, elections will eventually have consequences. As for the overtime rule, Finkel says, “the bottom line is that it all comes down to elections.”