This year saw not one but two major employment law rules move forward—one banning noncompete agreements for most workers, the other expanding white collar workers’ eligibility for overtime—only for both to get stalled in the courts before ever going fully into effect. But whether Kamala Harris or Donald Trump wins Tuesday is likely to have little immediate impact on either one; longer term, the election ultimately will have consequences.
In April, the Federal Trade Commission voted to approve a landmark rule that most new noncompete agreements would be barred, but it was immediately met with lawsuits that have kept it from being implemented. That same month, the U.S. Department of Labor issued a final rule raising the salary threshold at which white collar employees can be exempt from overtime pay. It went partially into effect, but was also stymied by legal challenges that may prevent a higher increase from happening Jan. 1.
In the near-term, whoever wins the election can’t reverse the legal obstacles that both measures face. And even if the legal challenges fail, it could take time for the fate of either to be known. There hasn’t been much talk of legislative activity on either issue.
“Unless the 119th Congress is aligned with the new administration, we are in a divided government and there’s going to be federal legislative gridlock for the next four years,” says Shannon Meade, executive director of law firm Littler Mendelson’s Workplace Policy Institute.
The fate of the noncompete ban appears a little more clear. “Many folks thought the FTC was quite a ways out over their skis in issuing the rule that they did,” says James A. Paretti, Jr., a Littler attorney and former EEOC senior counsel. “Noncompetes are older than the United States. They literally came over with the English common law.”
While there have been multiple lawsuits filed against the ban, the one to watch will be what happens in Texas, says Seyfarth Shaw attorney Michael Wexler. In August, a Federal District Court judge there “enjoined” or forbid the new rule from being implemented nationwide; the FTC last month appealed that decision. The case will be next heard—likely well into 2025—by the 5th Circuit Court, which is widely seen as particularly business friendly, and hardly eager to expand the federal government’s powers.
If it upholds the lower court’s decision as expected, a Trump or Harris administration would have to decide whether it wanted to appeal that decision, bringing the case to a Supreme Court that has already shown it’s unlikely to support broader government powers. A Trump FTC could drop the appeal and let the Circuit Court decision’s stand, but it might also decide it wants a final word on the issue from the Supreme Court, Wexler says. And while one might expect a Harris FTC to appeal the decision, leading to a Supreme Court hearing, it could also drop it. “Who’s to say Harris isn’t potentially more business friendly than Biden? We don’t know,” says Wexler.
Still, all signs point to the ban not moving forward. It’s “very unlikely, either legally or politically—take your choice,” says Wexler. “The machinations around it may be a little different depending on who wins, but I think ultimately, one way or another, the ban is just not something that’s going to take effect.”
Meanwhile, on the overtime rule, a decision by another Texas District Court is expected before the end of the year since employers have to put the rule into effect Jan. 1. (The salary threshold to be exempt from overtime pay increased to $43,888 in July; an additional increase to $58,656 on Jan. 1 is the measure under debate.) The judge has already blocked the rule for Texas state employees, a decision that “tipped his hand as to his view of the rule in its entirety,” says Noah Finkel, who co-chairs the wage and hour litigation group at Seyfarth Shaw. “There’s a lot of reasons to expect the judge ultimately will block the rule nationwide.”
If the unexpected happens and the judge does not block the rule and it goes into effect Jan. 1, Finkel says, a new Trump administration would not be able to outright withdraw the rule; it would have to go through the rulemaking process to create a new one. “They can’t just wave a wand at that point and get rid of it,” says Finkel. Meanwhile, employers will have already put the increase into effect, and Finkel notes rolling back that increase could “be a political bridge it might not cross,” he says. “As a practical matter, if this rule does not get enjoined, in my view it’s going forward.”
In the much more likely scenario that the court blocks the rule, Finkel says, a Trump win would mean “the rule is likely dead,” Finkel says, with any late appeal from an outgoing Biden administration likely dropped. If Harris wins, her Labor Department would presumably appeal that decision, sending it to the business-friendly 5th Circuit and potentially, up to the Supreme Court.
But even that doesn’t mean it’s over. An appeal by a Harris administration has at least some chance of succeeding, Finkel says, because even if the 5th Circuit is seen as business friendly, it did decide in a recent case that the Department of Labor has power to set a minimum salary for overtime exemptions, which sets a precedent. “Yes, the 5th Circuit is suspicious of business regulation, and the Supreme Court increasingly is as well,” Finkel says. But the decision in the recent case “provides a Harris DOL with more optimism than it had before,” he says.
It’s a reminder that even if neither law will see immediate changes, ultimately, elections have consequences. On the overtime rule, Finkel says, “the bottom line here is this all comes down to the election.”
