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What the DOL’s 2026 Overtime Rule Amendment Means for Employers
Many employers spent the better part of 2024 preparing significant changes to federal overtime rules, reclassifying employees, adjusting salaries, and updating payroll systems. That is, until the courts stepped in. On May 14th, the Department of Labor made it official: the 2024 salary thresholds are gone, and the 2019 levels are back.
Here is what happened, what it means, and what employers should do next.
What Just Happened and Why
On May 14, 2026, the Department of Labor formally reverted back to a 2019 standard, rescinding the 2024 federal rule that increased salary thresholds required for employees to qualify as exempt from the FLSA’s minimum wage and overtime requirements.
Some context on the FLSA and the DOL’s Final Rule:
The overtime rule is codified as a part of the Wages and the Fair Labor Standards Act, requiring nonexempt employees to receive overtime pay for hours worked over 40 per workweek at a rate of one and one-half times the regular rate of pay. To be legally classified as exempt, a worker must meet the specific criteria as defined by the Department of Labor.
Exempt employees are paid a set salary and do not receive overtime pay. This exemption is commonly referred to as the ‘white-collar’ exemption or the EAP (executive, administrative, or professional exemption). Basically, these workers get paid for what they do, not how many hours they work.
Generally, exempts from minimum wage and overtime pay requirements passed these three tests:
- The employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the salary basis test)
- The amount of salary paid must meet a minimum specified amount (the salary level test)
- The employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the regulations (the duties test)
Under the 2024 rule published by the DOL’s Wage and Hour Division, the standard salary level for exempt employees was set to increase to $844 per week ($43,888 per year) by July 1, 2024, with another increase to $1,128 per week ($58,656 per year) by January 1, 2025.
However, this never manifested because in November of 2024, the U.S. District Court for the Eastern District of Texas annulled the 2024 overtime rule as Judge Sean D. Jordan ruled that the DOL exceeded its authority by making salary level predominate over job duties. This invalidated the planned salary increases on a nationwide basis.
The DOL initially tried to appeal against the decision, but with the presidential transition, the DOL abandoned this effort. Now, the Fifth Circuit has officially dismissed the appeal, removed the vacated 2024 language, and restored the regulatory text from the DOL’s 2019 Final Rule. This is a formal correction to reflect what federal courts had already decided. The amendment took effect immediately upon publication.
The Numbers That Matter Now
Under the restored 2019 regulations, the salary thresholds for the FLSA’s “white collar” exemptions are as follows:
|
Exemption |
Restored 2026 Level |
|
Executive, Administrative, Professional |
$684/week ($35,568/year) |
|
Highly Compensated Employee (HCE) |
$107,432/year |
A few additional details worth knowing:
The 10% rule. Up to 10% of the standard salary threshold can be satisfied through nondiscretionary bonuses, incentive pay, or commissions — provided those payments are made annually or more frequently. This gives employers some flexibility in how they structure exempt compensation.
Computer employees. For employees who qualify under the computer employee exemption, the salary requirement can alternatively be met through an hourly rate of not less than $27.63 per hour.
Exempt categories with no salary requirement. The salary basis and salary level tests do not apply to bona fide doctors, lawyers, teachers, and outside sales employees. These employees are evaluated solely on the duties test.
Employers in U.S. territories. Different minimum salary levels apply to employers in Puerto Rico, Guam, the U.S. Virgin Islands, the Commonwealth of the Northern Mariana Islands ($455/week), and American Samoa ($380/week).
Remember: Salary Level Is Only One Piece
It is worth pausing here, because one of the most common compliance mistakes employers make is treating the salary threshold as the only box to check.
To qualify as exempt under the executive, administrative, or professional exemptions, an employee must satisfy all three of the following tests as defined above:
- The Duties Test
- The Salary Basis Test
- The Salary Level Test
An employee who earns $700 per week but whose job duties do not meet the regulatory definition for any white collar exemption is not exempt. Conversely, an employee whose duties clearly qualify but who earns $600 per week is not exempt either. All three tests must be satisfied.
State Requirements
The FLSA sets a federal floor, not a ceiling. Many states and localities have their own wage and hour laws that impose higher salary thresholds, more stringent duties tests, or both. Where state or local law provides greater protections than the FLSA, the more protective standard applies.
Note: In Colorado, the minimum salary level for executive, administrative, and professional overtime exemptions is $1,111.23 per week ($57,784 per year), which supersedes the federal minimum.
What Employers Should Do Now
The formal restoration of the 2019 thresholds is a natural checkpoint for employers to review their exempt classifications. Here is where to focus:
Audit your current exempt classifications. Review every employee currently classified as exempt and confirm that each satisfies the duties test, salary basis test, and salary level test under the restored regulations. Pay particular attention to employees who were reclassified or whose salaries were adjusted in anticipation of the 2024 rule.
Revisit any changes made for the 2024 rule. Some employers raised salaries or reclassified employees ahead of the 2024 effective dates. Now that those thresholds have been formally abandoned, employers should evaluate whether those changes remain appropriate under current law — or whether adjustments are warranted.
Check state and local requirements. Confirm that your exempt classifications satisfy not just the federal standards but also the requirements of every state and locality in which you operate.
Consider the PAID program. The DOL’s Wage and Hour Division offers a Payroll Audit Independent Determination (PAID) program, which allows employers to self-report and resolve potential minimum wage and overtime violations under the FLSA. Employers who identify potential compliance gaps may want to evaluate whether this program is appropriate.
Work with employment counsel. Exemption misclassification is one of the most common and costly FLSA compliance failures. The rules are technical, the fact-specific nature of the duties tests leaves room for error, and the consequences can be significant. Reviewing your classifications with experienced employment counsel is a sound investment.
Not sure whether your exempt classifications hold up under the restored rules? The AR Group can help you assess your exposure and build a compliance framework that works. Contact us today.
FAQ’s Section
Q: Our state has a higher salary threshold than the federal level. Which one applies?
A: Your state’s threshold applies. The FLSA sets a federal minimum, but where state law provides greater protections to employees, the more protective standard governs. Employers operating across multiple states must evaluate compliance in each jurisdiction separately.
Q: What happens if we’ve been misclassifying employees as exempt?
A: Misclassification can be costly. Under the FLSA, employees who were improperly classified as exempt may be entitled to back pay for unpaid overtime, going back up to two years (or three years for willful violations), plus an equal amount in liquidated damages, plus attorney’s fees. The DOL’s PAID program offers one avenue for employers to self-report and resolve potential violations proactively. If you have reason to believe a classification may not hold up, engaging employment counsel promptly is strongly advisable.
Q: Does the DOL’s technical amendment change anything for my business right now?
A: For most employers, the practical answer is no, but the formal answer is yes. The technical amendment doesn’t shift the enforcement posture; it formally corrects the Code of Federal Regulations to reflect what the courts already decided. What it does provide is regulatory certainty.
Q: We raised salaries in 2024 to comply with the new thresholds. Do we have to lower them now?
A: No, and you should think carefully before doing so. The amendment does not require employers to reduce compensation. Reducing salaries that were voluntarily increased could affect employee morale, trigger state or local wage notice requirements, or raise other legal considerations. If you increased salaries specifically to meet the 2024 thresholds, the better course of action is to consult with employment counsel before making any changes.