Employers in the hotel industry have two new federal regulations to navigate, each of which have fast-approaching deadlines.
On April 23, the U.S. Department of Labor announced its final rule raising the overtime exemption threshold to an equivalent annual salary of $43,888, effective July 1, from the current level of $35,568. The second deadline is Jan. 1, 2025, when that threshold rises again to $58,656.
On the same day, the Federal Trade Commission issued a final rule banning most existing non-compete agreements as well as the creation and enforcement of new non-competes. This rule goes into effect 120 days after publication in the Federal Register.
In a podcast interview with Hotel News Now, Andria Ryan, labor attorney and partner at Fisher Phillips, said both decisions will require employers to make some significant decisions and changes going forward.
Regarding the overtime threshold rule, some companies Ryan is working with are in a tough spot because they have to decide whether to increase a currently exempted employee to $43,888 a year knowing there’s another significant bump six months down the road, she said. It’s a matter of whether they’re willing to make that change or change the way they’re paying certain employees to make them overtime-eligible.
Even with the likely legal challenges, there’s not a lot of time between now and the July 1 deadline, Ryan said.
“Which managers are you willing to move into the new salary levels at both stages, so that they'll remain overtime-exempt?” she asked. “If you're going to change them to overtime-eligible, they're going to have to track their work time, which they have not been doing if they've been a salaried-exempt manager or supervisor.”
Companies have used non-compete agreements as a way of preventing a departing employee from working for a competitor for a limited period of time, Ryan said. State laws have generally governed these agreements, but the FTC is arguing that non-competes are a restraint on trade to justify it stepping in.
The ban doesn’t affect current ones in effect for senior executives who earn $151,164 a year and are in a policy-making position, she said. However, like with other employee categories, the FTC rule bans new non-competes for senior executives as well.
Although there aren’t many frontline employees who would be subject to non-competes in hospitality, company executives as well as some general managers and directors of sales could be, Ryan said.
“Consider, if you are using non-competes, whether there's some alternatives,” she said. “Do you need to beef up your confidentiality and trade secret and non-solicitation of customers and those kinds of policies and agreements? It's probably a good time to consider whether alternatives might work for you.”
For more of HNN's conversation with Andria Ryan, listen to the podcast above, and subscribe to Hotel News Now wherever you find podcasts.