A ban on noncompetes and expansion of overtime: What new US rules mean for KC workers

The Biden administration announced two new labor rules this week that will impact millions of workers across the country, including many in the Kansas City area.

The first is a ban on so-called “noncompete” clauses by the Federal Trade Commission that could go into effect as early as late August.

The decision, which already faces a legal challenge from the U.S. Chamber of Commerce, will prohibit employers from restricting their employees’ ability to take another job in the same industry. It will also nullify most existing noncompete clauses.

The other reform, through the U.S. Department of Labor, significantly raises the threshold under which salaried employees are entitled to overtime benefits.

Currently only salaried workers making less than $35,568 are eligible for time-and-a-half pay for working more than 40 hours per week. That cap will rise to $43,888 July 1 and to $58,656 Jan. 1, 2025.

The Star spoke with labor advocates and business groups in Kansas City about what impact these developments could have in the metro. Here’s what to know.

How will a ban on noncompete clauses impact KC workers?

With the exception of some corporate executives, the FTC’s ban on noncompete clauses will also nullify those already that bind many Kansas City workers.

If you have signed a noncompete agreement in the past, you will no longer be bound to it when the rule goes into effect — likely around late summer. That means you will be free to work for a competitor of your current or past employer, or start your own business in the same field.

While originally intended to protect trade secrets and sensitive company information, noncompetes were increasingly being used in low-wage industries to prevent employees from changing jobs. Local labor groups say that these clauses are often used in the Kansas City area to trap workers in agreements they may not fully understand.

“We know it’s happening in the fast food industry,” said Jordan Hoffman Kahle, a staff attorney at the Kansas City based nonprofit Heartland Center for Jobs & Freedom.

“Those noncompete agreements (are) pretty restrictive for any worker, but especially for workers in the wage position (who) need the job and might not have the opportunity to review this contract that’s presented to them.”

According to the nonprofit National Employment Law Project, noncompete agreements disproportionately impact women and people of color by reducing job mobility and stifling entrepreneurship.

“Employers were definitely abusing those provisions, sneaking them into workers’ employment contracts,” Kahle said. “We definitely welcome the change for noncompete agreements, and hope that in the future, maybe we’ll see other changes where other abusive and maybe hidden contract provisions like that won’t be included.”

While the U.S. Chamber of Commerce has sued to stop the rule, the Kansas City Chamber of Commerce told The Star that it does not have an official position on the issue.

What will the new overtime threshold mean for KC workers?

Hundreds of thousands of workers in the metro area make more than $35,568 but less than $58,656 per year, according to Mid-America Regional Council research director Frank Lenk.

An estimated 38.4% of the total workforce in the greater Kansas City area work in industries with a median pay rate between those two numbers, he said. If you earn a salary in this range, that means you’ll be eligible for overtime pay starting on Jan. 1, 2025. The new rule won’t apply retroactively to past salaried work.

Kahle said this development will benefit many Kansas City employees, particularly those in low-paid managerial positions.

“In all sorts of industries, to get around paying someone overtime, the employer might just classify them as a manager, give them some managerial responsibilities and then under the existing rule they were able to just not pay them any overtime for really, really long weeks,” she said.

Kahle added that in service industry positions, managerial roles can still involve many of the same tasks as those done by hourly workers. The new threshold will ensure those making a modest salary are compensated for their overtime work alongside their co-workers who are paid by the hour.

Local labor advocates noted that while the increase will help many workers, their fight continues to ensure fair wages and working conditions for all.

“These policy changes constitute a huge victory for the working class,” said Aditi Ramaswami, a spokesperson for the Missouri Workers Center and the local service industry employees’ advocacy group Stand Up KC.

“(But) much work remains to ensure fair pay for all workers, including those who have been fighting with Stand Up KC to raise the minimum wage to a living one, and to achieve dignity and respect on the job.”

Missouri’s minimum wage is $12.30 per hour this year, while Kansas’ is the federal minimum wage of $7.25 per hour. According to the MIT Living Wage Calculator, the hourly wage a single adult with no children needs to earn to afford basic life necessities in the city of Kansas City is $21.70 per hour in 2024.

When will new labor reforms go into effect?

The ban on noncompete clauses goes into effect 120 days after the FTC’s order appears in the Federal Register. This online journal is where all federal government agency rules and notices are published.

FTC spokesperson Victoria Graham told The Star that the agency does not know the exact date its rule will appear in the publication. If the journal publishes the rule within the next week, it would go into effect in late August.

After the rule takes effect, your employer is not allowed to ask you to sign or hold you to a noncompete agreement unless you are a senior executive. If they do, you can report a violation by emailing noncompete@ftc.gov.

The overtime threshold will increase twice in the coming months: to $43,888 on July 1 and to $58,656 on Jan. 1, 2025. The cap will then continue to renew every three years starting July 1, 2027, to match updated wages and salary levels.

If you believe you’re being illegally underpaid for your work before or after this increase goes into effect, you can file a complaint with the Department of Labor’s Wage & Hour Division online or by calling 1-866-487-9243.

Do you have more questions about labor or wages in the Kansas City area? Ask the Service Journalism team at kcq@kcstar.com.