Over the past few years, employers have had to navigate a changing set of rules for determining which employees are eligible for overtime pay under federal law. That path became somewhat clearer in May 2026, when the U.S. Department of Labor’s Wage and Hour Division formally rescinded the 2024 overtime rule and restored the prior regulatory framework.
However, this development does not mean employers can take a hands-off approach. Overtime compliance still requires careful attention to employee classifications, salary levels, job duties and applicable state law.
What the 2024 Overtime Rule Would Have Changed
Under the Fair Labor Standards Act (FLSA), certain salaried employees may be exempt from overtime pay. To qualify for one of the common “white collar” exemptions, employees generally must be paid on a salary basis, earn at least a federally required minimum salary and primarily perform qualifying executive, administrative or professional duties.
In April 2024, the DOL issued a final rule that would have significantly increased the minimum salary threshold for these exemptions. The rule was scheduled to raise the threshold in two phases:
- From $35,568 annually to $43,888 annually on July 1, 2024
- From $43,888 annually to $58,656 annually on January 1, 2025
The rule also addressed the exemption for certain highly compensated employees. That threshold increased to $132,964 on July 1, 2024, and was scheduled to rise to $151,164 on January 1, 2025.
In addition, the rule would have created automatic updates to the salary threshold every three years beginning July 1, 2027, based on updated wage data.
Why the Rule Was Vacated
The 2024 final rule was struck down on November 15, 2024, by the U.S. District Court for the Eastern District of Texas. The court’s decision applied to the rule in its entirety, including the July 1, 2024, increases that had already taken effect.
The court concluded that the DOL exceeded its authority by placing too much emphasis on salary level rather than job duties. In the court’s view, whether an employee is exempt or nonexempt should be based primarily on the work the employee performs, not salary alone. The court also rejected the rule’s automatic updates to the salary threshold.
This decision came after the U.S. Supreme Court overturned the legal doctrine known as “Chevron deference,” which had previously directed courts to defer to reasonable federal agency interpretations of ambiguous statutes. Without that doctrine in place, courts have greater latitude to reject agency rules.
Prior Overtime Regulations Restored
Although the DOL initially appealed the district court’s decision, those appeals were dismissed by the U.S. Court of Appeals for the Fifth Circuit on May 5 and May 7, 2026. As a result, the district court’s orders became final.
On May 14, 2026, the DOL’s Wage and Hour Division announced a technical amendment restoring the regulations for the FLSA’s executive, administrative and professional exemptions that were established under the 2019 final rule. The amendment removed the 2024 regulatory text from the Code of Federal Regulations.
This means the federal salary threshold for the standard white collar exemptions remains:
- $684 per week, or
- $35,568 annually for a full-year worker
The total annual compensation threshold for highly compensated employees remains $107,432. The higher 2024 thresholds and automatic three-year updates are no longer in effect.
Why Employers Should Still Review Overtime Compliance
Employers that changed employee classifications, increased salaries or adjusted staffing plans in response to the 2024 rule should proceed carefully before reversing those decisions. Rolling back compensation or classification changes could create employee-relations issues, legal concerns or payroll complications.
It is also important to remember that federal law is only part of the compliance picture. Some states impose higher salary thresholds or different requirements for overtime exemptions. Employers must comply with the rules that are most protective of employees.
Now is a good time to work with legal counsel or a qualified advisor to:
- Review exempt and nonexempt classifications
- Confirm that job duties satisfy the applicable exemption tests
- Document legitimate business reasons for compensation or classification changes
- Evaluate payroll, budgeting and labor-cost implications
- Check whether state wage and hour laws impose stricter requirements
Do Not Overlook the Duties Test
The rescission of the 2024 overtime rule may make federal compliance more predictable, but it does not eliminate the need for careful analysis. Salary level is only one part of the exemption test. Employees must also be paid on a salary basis and perform duties that qualify under the applicable exemption.
For employers, the key takeaway is simple: The road to federal overtime compliance may be clearer, but it still requires ongoing attention. Contact us for help evaluating payroll costs, reviewing employee classifications and planning for wage and hour compliance.
Frequently Asked Questions
What is the current federal salary threshold for white collar overtime exemptions?
The federal salary threshold for the standard executive, administrative and professional exemptions is $684 per week, or $35,568 annually for a full-year employee.
Is the 2024 overtime rule still in effect?
No. The 2024 overtime rule was vacated by a federal court, and the DOL’s appeals were dismissed in May 2026. The DOL then formally restored the prior regulatory framework established under the 2019 final rule.
Can employers reverse salary increases made because of the 2024 overtime rule?
Employers should be cautious before reversing salary increases or classification changes made in response to the 2024 rule. Such changes may create employee-relations issues, raise legal questions or trigger state law considerations. Employers should consult legal counsel before making adjustments.
Does salary alone determine whether an employee is exempt from overtime?
No. Salary is only one part of the exemption analysis. In most cases, employees must be paid on a salary basis, earn at least the required salary threshold and perform qualifying executive, administrative or professional duties.
Do state overtime laws still matter?
Yes. Some states have higher salary thresholds or stricter overtime requirements than federal law. Employers must review both federal and state wage and hour laws to determine which rules apply.