This past week, the Biden Administration has announced two regulatory changes, that are not through the Department of Homeland Security that might impact employers of high-skilled immigrants that use employment-based visas for their workforce. The Federal Trade Commission (FTC) has announced a rule that bans non-competes both moving forward and the enforcement of past non-competes with limited exceptions. Additionally, the Department of Labor (DOL) has released a new rule as it relates to overtime and the thresholds for exempt employees. While these rules may not have an overwhelming impact on employment-based immigration, it is still important for employers and human resource professionals to understand these new rules and implement the changes in their practices. Note, the non-compete regulation is already subject to litigation and the overtime one may be in the future, this article will be addressing the two regulations as of the date of publication. There may be changes that come about due to the pending or contemplated lawsuit(s).

Non-Compete Regulation

On April 23, 2024, The FTC voted to approve and issue a final rule that will prevent employers from entering into new non-competes or enforcing old non-competes. This rule is set to go into effect from 120 days from the date that it is published into the Federal Register. The FTC defines a non-compete clause as:

a term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from: (i) seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or (ii) operating a business in the United States after the conclusion of the employment that includes the term or condition.

Non-competes are often used by employers to prevent employees from working with competitors or clients as employers often view those subject to non-competes as important and/or coming across proprietary information that might impact their work as a company. Notably some states, such as California, have already outright barred non-competes, and assuming this rule goes into effect, will be a nationwide bar on the restraints. As an immigration law firm, we see these in some employment contracts , especially for employees that are working with clients or with sensitive or high-level technologies. Employers believe that these clauses are necessary to protect the company. Moving forward, assuming this rule goes into effect, these clauses will not be allowed.

For existing non-competes, employers will be provided to give “clear and conspicuous notice” to all employees that these agreements are enforceable once the rule is effective. The FTC rule has model language for this notice and the notice must be in writing.

There are very limited exceptions to this rule that the FTC allows. Pre-existing non-competes with “senior executives” will still be allowed to continue in limited circumstances. The FTC defines a “senior executive” as one that is in a “policy making position” and is earning an income of $151,164 or more through salary, bonuses, and/or commissions. Note, contributions to 401k or other benefits are not included in this calculation. The FTC has defined policy-making authority as the authority to control “significant aspects of a business entity or common enterprise.”

Employers and human resource managers of high-skilled immigrants need to be aware of this rule and take the necessary steps in the business to comply with the rule once it is published and effective. Additionally, they should track the ongoing litigation for any changes. Note, even if litigation is successful, this likely does not change the state laws on non-compete agreements.

Overtime Regulation Changes

Additionally, on April 23 the Department of Labor (DOL) announced a final regulation raising the salary threshold for employees to be exempted from overtime requirements. In particular, this rule significantly raises the salary threshold for “white collar” workers. Multiple employment law firms have noted that this rule relies on similar methodologies as a similar rule that courts found invalid in 2016, so litigation is likely but has, as of publication, not been filed. 

At present, overtime is required when an employee works more than 40 hours a week. There are various exemptions known as the “white collar” employee exemption. This includes a three part test: 1) the employee must be paid on a salary basis, not hourly; 2) the primary duties must be exempt job duties (i.e. is in an executive, professional, or administrative role); and 3) the employee must earn a minimum salary. The new rule increases the minimum salary threshold part of the test for employers to exempt employees from overtime.

At present the threshold salary for an exempt employee is $684 per week ($35,568) per year. In the final rule by DOL, the threshold is $43,888 effective on July 1, 2024 and will increase to $58,656 on January 2025. The new rule includes automatic updates every three years. So this means that starting on July 1, 2024, if you are paying an employee less than $43,888 they will likely qualify for the time and a half overtime that is required by the Fair Labor Standards Act. Note, this does not impact state laws that have higher requirements for exempted employees.

Notably, this overtime rule should not have a significant impact on the high-skilled immigration community. The H-1B visa program, one of the most common work visas, in the United States requires employers to pay their H-1B workers a prevailing wage, which is determined based on the job location, occupation, and level of experience required. The prevailing wage is intended to ensure that H-1B workers are not paid less than similarly employed U.S. workers in the same geographical area. Employers must attest to paying the prevailing wage on the Labor Condition Application (LCA) filed with the Department of Labor (DOL) before hiring an H-1B worker. The prevailing wage is calculated using wage data from the Occupational Employment Statistics (OES) program or other credible sources recognized by the DOL. Failure to pay the prevailing wage can lead to penalties for the employer and potentially jeopardize their ability to participate in the H-1B program. A vast majority of specialty occupation positions have prevailing wages that are higher than the overtime rules and employers tend to pay higher. While H-1B and E-3 visas are the only categories that require the payment of a prevailing wage, it is common that other non-immigrant visas, such as TN, L-1, or O-1, would be paying at least prevailing wage even when not required.

With that said, this may come in in the F-1 OPT or STEM OPT context. While OPT is not required to be paid, it often is, and STEM OPT is required to be a paid position. While there is not a mandatory minimum, or a requirement to follow the OES data, STEM OPT employers must attest that the student’s pay is commensurate to that provided to US employees who perform similar duties. Given that most STEM OPT students are viewed as interns or entry-level, it is possible their salary will be below the thresholds noted above. In this case, employers need to understand the new overtime rules and how to properly run the payrolls for these positions. 

Conclusion

In conclusion, the recent regulatory changes announced by the Biden Administration, particularly regarding non-competes and overtime regulations, underscore the evolving landscape of employment practices in the United States. While these changes may not directly target high-skilled immigration, they do necessitate attention and adaptation from employers and human resource professionals. The FTC’s ban on non-competes, with limited exceptions, marks a significant shift that will impact how companies protect their interests and manage their workforce. Similarly, the Department of Labor’s adjustment of the overtime threshold for exempt employees signals a commitment to fair labor practices. Although these changes may not immediately affect the high-skilled immigration community, they serve as reminders of the broader legal framework within which immigration and employment law intersect. As employers and HR professionals navigate these adjustments, it is crucial to stay informed, comply with regulations, and remain vigilant for any further developments or litigation that may arise. By understanding and adapting to these changes, employers can continue to foster an environment that promotes both innovation and fairness in the workplace, ensuring the continued success and vitality of the high-skilled immigration workforce in the United States.

Reddy Neumann Brown PC located in Houston, Texas, has been serving the business community for over 25 years and is Houston’s largest immigration law firm focused solely on U.S. Employment-based immigration. We work with employers, employees and investors helping them navigate the immigration process quickly and cost-effectively.

By: Steven Brown

Steven Brown is a Partner at Reddy Neumann Brown PC where he works in the Non-immigrant visa department and leads the Litigation Team. His practice covers all phases of the non-immigration visa process including filing H-1B, L-1, E-3, H-4, and H-4 EAD petitions. In the last two years, Steven has successfully handled over 1,000 non-immigrant visa petitions including filing petitions, responding to any necessary Requests for Evidence, and drafting motions and appeals. He has also become a key resource for F-1 students that seek guidance on properly complying with the F-1 visa regulations and any OPT or CPT issues they may have. Additionally, Steven holds a weekly conference call for companies that are part of one of the largest organizations for IT Services companies in America.