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Biden Administration Expands Push to Shift Workplace Rules in Favor of Workers

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Key Takeaways

  • President Joe Biden released major workplace regulation changes last week, the latest moves in his administration’s campaign to give more power to workers.
  • One expands the number of workers covered by federal overtime rules, while another bans non-compete clauses in employment agreements.
  • Business trade groups largely came out against the rulings, and legal challenges have already been filed against the non-compete ban.

President Joe Biden’s administration released major regulations last week aimed at tilting workplace rules in favor of workers, the latest in a series of actions by Biden to use the power of federal regulatory agencies to advance policy goals.

Federal regulators finalized rules expanding required overtime pay for workers making less than $58,656 and banning non-compete agreements on Tuesday. And in a move affecting employer-sponsored retirement plans, they finalized a rule requiring retirement advisors to act as fiduciaries, in the best interest of their clients rather than being paid to promote certain financial products.

Taken together, the policies could alter the balance of power in the workplace, giving employees more leverage to switch jobs, potentially raising their bargaining power and ultimately their wages.

“It appears that the Biden administration is taking a number of steps to benefit workers, potentially at the expense of their employers, and is trying to tilt the playing field more in favor of workers,” said  Leonard Samuels, a labor and employment expert and partner at Berger Singerman law firm. “What the Biden administration is doing all at once is fairly breathtaking.”

The new rules are an attempt to “get American workers a better deal,” Biden said in a post on social media platform X. “Workers ought to have the right to choose who they want to work for,” Biden wrote of the non-compete ban. And regarding the overtime rule: “If you work extra hours, you deserve extra pay.” 

Businesses stand to be affected by the new rules, and some leaders have come out against them. The non-compete ban already faces a legal challenge from a large national group representing businesses.

“This decision sets a dangerous precedent for government micromanagement of business and can harm employers, workers, and our economy,” Suzanne Clark, the President of the U.S. Chamber of Commerce, a trade group representing businesses, said in a press release Tuesday. The Chamber sued the Federal Trade Commission’s ban on non-compete agreements.

More Workers Eligible For Overtime Pay

The Biden administration has forgiven federal student loan debt for millions of borrowers, cracked down on “junk fees” across industries, and made it harder for companies to classify their workers as contractors in order to avoid workplace rules protecting employees—all without legislation from Congress. 

Among last week’s regulations, the Department of Labor expanded the number of workers covered by federal overtime rules, which require employers to pay people at 1.5 times their regular hourly rate for any work they do beyond 40 hours a week. 

Starting in July, anyone who makes less than $43,888 per year will be entitled to overtime pay no matter what kind of work they do, up from the current level of $35,568. That limit will be raised once again in January to $58,656 a year.

An additional 4 million people will become eligible for overtime by the new year, the department estimated.

Workers will earn an additional $1.5 billion extra per year under the new rules, according to an analysis by the Economic Policy Institute, a progressive think tank. It’s also likely to reduce the amount of unpaid overtime that salaried workers undertake, economists at the EPI said in a blog post.

The National Retail Federation, a trade group representing retailers, predicted the rule could backfire by causing employers to offer less flexible working arrangements. 

“The new rules will cause employers to reexamine compensation packages for millions of workers nationwide,” David French, executive vice president of government relations at the federation said in a press release. “Some workers may lose the status of a managerial position. Some may lose much-desired flexibility as to when, how and where they work, including the ability to work from home.”

No More Non-Compete Agreements

The Federal Trade Commission also finalized a rule banning employers from making their workers sign agreements limiting where they can work in the future as a condition of employment. 

For example, employers can no longer prevent workers from moving to another company in the same industry for a year after they quit. Such “non-compete” clauses have become extremely common, the FTC said, covering some 30 million workers and preventing people from switching jobs, negotiating for higher pay, or quitting to start their own companies. 

The FTC cited stories sent in from workers in various industries including an asphalt salesperson, a bartender, a veterinarian, a doctor, and even a power-washer who had their careers hindered by non-compete agreements.

“All I know is power-washing and these business owners all want me to sign a non-compete clause,” one of the anonymous commenters told the FTC. “It’s one big circle of wealthy business owners keeping the little man down.”

The rule not only bans future noncompete contracts for all workers other than senior executives, but it would render current noncompetes null and void, freeing employees to work wherever they want or start their own companies competing with their former bosses. 

Samuels said the part of the rule most vulnerable to being blocked by a lawsuit was probably the nullification of existing contracts. But if the rule survives legal challenges, it could have a massive impact on the workplace, he said. 

“I think you’re going to see a lot more movement among employees,” Samuels said.

Business Groups Have Mixed Feelings

Business groups argued the ban would have unintended consequences. 

“The FTC’s rule banning noncompete agreements is unprecedented and threatens manufacturers’ ability to attract and retain talent,” Chris Netram, managing vice president of policy for the National Association of Manufacturers, said in a statement. “In addition, today’s action puts at risk the security of intellectual property and trade secrets.”

The Federation of American Hospitals, a group representing for-profit healthcare facilities, said the ban would backfire by making it harder to recruit and retain caregivers. The federation said it would give nonprofit hospitals an edge as legal experts say the rule will not apply to those entities.

Small Business Majority, an advocacy group, was among several small business advocacy groups that came out in support of the rule. 

“Small businesses overwhelmingly want a level playing field, and non-competes don’t deliver because they are a threat to the free, fair and open competition that is essential to a thriving and equitable economy,” John Arensymeyer, CEO of the group, wrote in a statement. 

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