If you adjusted salaries, reclassified employees, or budgeted for a higher exempt-salary threshold anytime in the last two years, this update changes the math again.
On May 14, 2026, the U.S. Department of Labor’s Wage and Hour Division officially rescinded the 2024 overtime exemption rule. After the Fifth Circuit denied the government’s appeals, the DOL revised its regulations to restore the pre-2024 salary basis standard. For employers, that means the federal exempt-salary threshold is back to where it stood before the 2024 rule ever took effect, not where the 2024 rule tried to move it.
What Actually Changed
Before this update: The 2024 rule aimed to raise the standard salary threshold to $58,656 per year ($1,128/week) by January 2025, with a further increase planned for 2027.
After the rescission: That increase is gone. The governing federal standard reverts to the 2019 level:
- Standard salary threshold: $684 per week ($35,568 per year)
- Highly compensated employee (HCE) threshold: $107,432 per year (with at least $684/week paid on a salary or fee basis)
If your business raised salaries specifically to hit the vacated 2024 numbers, you’re not required to roll those back, but you’re also no longer required to meet them under federal law.
What Didn’t Change
This is the part employers most often get wrong, and it’s the same issue that showed up in DOL investigations I worked personally: the salary threshold is only half the exemption test.
To classify an employee as exempt from overtime under the executive, administrative, or professional exemptions, you still need to satisfy:
- The salary basis test: paid a predetermined, fixed salary not subject to reduction based on quality or quantity of work.
- The salary level test: now $684/week minimum (or $107,432/year for HCE).
- The duties test: the employee’s actual job duties, not their title, must primarily involve executive, administrative, or professional work as defined by the regulations.
A “Manager” title on a business card has never been enough to justify an exemption, and it still isn’t. If the duties test fails, the salary level is irrelevant, the employee is non-exempt regardless of pay.
The State-Law Trap
Here’s where I see the most costly mistakes: this is a federal rollback, not a nationwide one. A number of states set their own exempt-salary thresholds, independent of whatever the DOL does, and several sit well above the restored federal number:
- California
- New York
- Washington
- Colorado
If you operate in any of these states, or others with their own exempt-salary rules, you must comply with whichever standard is stricter for that location. The federal rescission does not lower your obligation in a state that requires more.
What Employers Should Do Now
- Re-audit any reclassifications made in 2024-2025: If you moved employees to exempt status anticipating the higher threshold, confirm those roles still pass the duties test under the restored $684/week standard, don’t assume the classification is automatically fine just because the salary requirement dropped.
- Check every state and locality where you have employees: Map your workforce against state-specific thresholds before you rely on the federal number.
- Document your analysis: In an audit, “we believed the employee was exempt” isn’t a defense, a documented salary-basis and duties-test analysis is.
- Watch for the next shift: Wage and hour rulemaking has been unusually active in 2026. A change reversed once can be revisited again, and the DOL has additional proposals in motion this year, including work on joint-employer standards, independent contractor classification, and tip credit rules.
Bottom Line
Compliance isn’t a one-time fix triggered by a headline, it’s an ongoing review. As a former DOL Wage & Hour Investigator, I can tell you that these threshold changes are exactly the kind of moment that creates confusion, and confusion is what triggers complaints, which is what triggers investigations.
If you’re not sure whether your current exempt classifications hold up under the restored threshold, or under your state’s rules, a compliance review now is far cheaper than a DOL audit later.
Disclaimer: This article is provided for general informational purposes only and does not constitute legal advice. Wage and hour laws vary by state and change frequently. Consult a qualified professional regarding your specific situation before making compliance decisions.
