Client Alert June 18, 2024 April Y. Li

Pending Lawsuits Challenge Employment Rule Changes

Over the past year, multiple federal agencies have taken action that will have material impact on employers.  These actions include the U.S. Department of Labor’s (“DOL”) final rule increasing the salary threshold for employees to be exempt from minimum wage and overtime requirements under the Fair Labor Standards Act (“FLSA”), the National Labor Relations Board’s (“NLRB”) 2023 decision prohibiting the use of confidentiality and non-disparagement provisions in severance agreements, and the Federal Trade Commission’s (“FTC”) issuance of a rule banning non-compete provisions except in very limited circumstances.  For additional information regarding these rule changes, see the following client alerts:;  Employers should prepare for compliance with these rules, but should also be aware that lawsuits have been filed challenging these agency actions.  Decisions in those lawsuits are expected in the coming weeks.

Multiple lawsuits have been filed to challenge the DOL’s rule increasing the salary threshold to be considered an “exempt” employee under FLSA.  In one of those lawsuits, the State of Texas sued the DOL in the U.S. District Court for the Eastern District of Texas and filed a motion to prevent the implementation of the new salary threshold.  State of Texas v. U.S. Dept. of Labor, et al.  A hearing on this motion is scheduled for June 24, 2024.  It is unknown how soon the court will issue a decision following the hearing, but one will presumably be issued prior to July 1, 2024, the current effective date of the DOL’s rule.

Regarding the FTC’s new rule, set to become effective on September 4, 2024, multiple businesses and associations have filed lawsuits in federal courts in multiple states challenging the FTC’s authority to adopt the non-compete ban.  In one such case, Ryan LLC v. FTC, pending in the U.S. District Court for the Northern District of Texas, a motion has been filed to delay the effective date and enjoin the FTC rule.  Notably, the U.S. Chamber of Commerce, which successfully obtained a ruling in March 2024 from a different Texas federal court striking down an NLRB rule, has intervened in this lawsuit.  The court has stated that it will issue a decision on the motion by July 3, 2024.

In addition, employers should be aware that a lawsuit concerning the legality of confidentiality and non-disparagement provisions in severance agreements is currently pending in the U.S. Court of Appeals for the Sixth Circuit, which is the circuit that includes Michigan.  In February of 2023, the National Labor Relations Board (“NLRB”) issued a decision prohibiting employers from offering employees severance agreements that would require employees, even after their employment ends, to refrain from disclosing the terms of the severance agreements and from making statements that could disparage the employer.  The Michigan hospital affected by this decision filed a lawsuit, urging the court to reject the NLRB’s interpretation of the National Labor Relations Act. McLaren Macomb v NLRB.  Oral argument on the issue was conducted in April 2024, but no decision has been issued.

We will continue to monitor developments regarding the pending lawsuits.  If employers have questions about the lawsuits, the rules involved, noncompete clauses, or severance agreements, employers should contact Nikole Canute, Scott Dwyer, Nate Wolf, Dominic Clolinger, Kathryn Stegink, or Yue (April) Li as soon as practicable.


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