For employers, wage and hour compliance can feel like a moving target. Just when businesses begin adjusting policies and compensation structures to comply with a new regulation, the rules change again.
That is exactly what has happened with the U.S. Department of Labor’s overtime regulations.
On May 13, 2026, the Department of Labor (DOL) officially rescinded the 2024 overtime rule that would have significantly expanded overtime eligibility for many salaried employees. As a result, employers are now back to the salary threshold established during the first Trump Administration in 2019.
While the change may provide some relief for employers that were preparing for higher salary requirements, it does not eliminate the need for careful classification decisions. Employers must still ensure that exempt employees satisfy both the salary and duties requirements under the Fair Labor Standards Act (FLSA).
Let’s take a closer look at what changed, why it happened, and what employers should do next.
Understanding the FLSA Overtime Rules
The Fair Labor Standards Act generally requires employers to pay overtime to employees who work more than 40 hours in a workweek.
However, certain employees may qualify for exemption from overtime requirements under what are commonly known as the “white-collar exemptions.” These exemptions typically apply to executive, administrative, and professional employees.
To qualify for one of these exemptions, employees generally must meet two requirements:
- They must be paid on a salary basis.
- They must perform qualifying exempt duties.
Both requirements matter. Meeting only one of them is not enough.
The salary threshold often receives the most attention because it provides a clear numerical benchmark. However, the duties test remains equally important and frequently determines whether an exemption applies.
What the 2024 Overtime Rule Would Have Done
In 2024, the Biden Administration’s Department of Labor adopted a rule designed to expand overtime eligibility by increasing the minimum salary threshold for exempt employees.
The rule raised the salary requirement from:
- $684 per week ($35,568 annually)
to:
- $844 per week beginning July 1, 2024
- $1,128 per week beginning January 1, 2025
The rule also increased the compensation threshold for highly compensated employees and introduced automatic salary updates every three years.
Supporters argued that the changes reflected modern wage levels and would extend overtime protections to millions of workers.
For employers, however, the rule created significant compliance challenges. Businesses would have been forced to either:
- Increase salaries to maintain exempt status,
- Reclassify employees as nonexempt and begin tracking hours, or
- Adjust staffing and scheduling practices to manage overtime costs.
Many organizations began preparing for these changes long before the rule’s second increase was scheduled to take effect.
Why the Rule Was Struck Down
The 2024 rule quickly faced legal challenges in federal court.
In November 2024, the U.S. District Court for the Eastern District of Texas vacated the rule nationwide in State of Texas v. U.S. Department of Labor.
The court concluded that the Department of Labor exceeded its authority by placing too much emphasis on salary levels and not enough on employee duties.
According to the court, Congress intended the white-collar exemptions to be determined primarily by the nature of an employee’s job duties. By dramatically increasing the salary threshold, the court found that the DOL effectively replaced the duties analysis with a compensation test.
The decision followed a pattern that employers have seen before.
In 2017, another federal court in Texas struck down the Obama Administration’s proposed overtime rule for similar reasons. In both cases, courts expressed concern that large salary increases could prevent otherwise exempt employees from qualifying based solely on compensation levels rather than their actual job responsibilities.
Although the Biden Administration appealed the 2024 decisions, the current Department of Labor has now withdrawn those appeals and formally rescinded the rule.
What Salary Threshold Applies Now?
With the rescission now in effect, employers should apply the salary threshold established under the 2019 rule.
The current federal minimum salary threshold for most white-collar exemptions is:
$684 per week, or $35,568 annually.
This threshold became effective immediately upon the DOL’s rescission of the 2024 rule.
The Department has indicated that no additional notice-and-comment period will occur before returning to the prior standard.
For many employers, this creates greater certainty regarding employee classifications and payroll planning moving forward.
What Employers Should Remember About Exempt Status
One of the most common misconceptions regarding overtime exemptions is that salary alone determines whether an employee is exempt.
It does not.
An employee earning more than the salary threshold is not automatically exempt from overtime requirements. Likewise, paying someone a salary instead of an hourly wage does not automatically remove overtime obligations.
Employers must still evaluate whether the employee’s actual job duties satisfy the requirements for an executive, administrative, or professional exemption.
For example, job titles alone do not determine exempt status. Calling someone a manager does not necessarily make them exempt if their day-to-day responsibilities do not meet the applicable legal standards.
Misclassification can expose employers to:
- Unpaid overtime claims
- Liquidated damages
- Attorneys’ fees
- Government investigations
- Class and collective action lawsuits
As a result, employers should periodically review both compensation structures and job duties to ensure classifications remain compliant.
State Laws May Still Require Higher Salary Levels
The return to the federal 2019 threshold does not mean every employer can automatically rely on the $684-per-week standard.
Many states maintain their own wage and hour laws, including salary thresholds that exceed federal requirements.
When federal and state laws differ, employers generally must follow whichever standard provides greater protection to employees.
This issue is particularly important for businesses operating in multiple states. An employee who qualifies as exempt under federal law may not qualify under a particular state’s requirements.
Employers with multi-state workforces should regularly monitor state wage and hour developments and ensure compensation practices comply with all applicable laws.
Practical Steps Employers Should Take Now
Although the rescission may reduce immediate compliance pressure, employers should avoid viewing this as a reason to ignore wage and hour compliance altogether.
Instead, this is a good opportunity to review existing classifications and policies.
Employers should consider:
- Reviewing exempt and nonexempt employee classifications
- Evaluating whether exempt employees satisfy applicable duties tests
- Confirming salary levels meet federal and state requirements
- Updating employee handbooks and payroll practices where necessary
- Monitoring future regulatory developments from the Department of Labor
Wage and hour rules continue to evolve, and future administrations may once again seek changes to overtime regulations.
Key Compliance Considerations Going Forward
The Department of Labor’s decision to rescind the 2024 overtime rule marks another significant shift in the ongoing debate over overtime eligibility and employee classification.
For now, employers are operating under the familiar 2019 salary threshold of $684 per week. However, the underlying compliance obligations remain largely unchanged. Exempt status still depends on both salary and job duties, and state laws may impose additional requirements.
The lesson for employers is straightforward: wage and hour compliance is about more than meeting a salary threshold. Careful classification decisions, regular policy reviews, and proactive legal guidance remain essential for reducing risk and avoiding costly disputes.
When employment regulations change, the businesses that fare best are often the ones that stay informed and adapt before problems arise.
