DOL Formally Rescinds 2024 Overtime Rule, Restoring $35,568 Salary Threshold

The whiplash is finally over. After years of intense legal battles, shifting deadlines, and widespread payroll confusion, the United States Department of Labor has officially wiped the slate clean on federal overtime rules. For millions of workers and human resources departments across the country, the regulatory landscape has finally stabilized into a predictable framework. The constant back-and-forth over who qualifies for time-and-a-half pay had left both employees and employers struggling to plan their financial futures. Now, with a definitive administrative action, the government has provided a clear, enforceable rulebook that eliminates the guesswork from salary negotiations and workforce classification.[1][2]

On May 15, 2026, the Department of Labor published a technical amendment in the Federal Register that formally rescinds the sweeping 2024 overtime rule. This administrative move permanently restores the baseline salary threshold for "white-collar" exemptions under the Fair Labor Standards Act to $35,568 per year, or $684 per week. By officially removing the vacated regulatory text from the Code of Federal Regulations, the agency has cemented the 2019 standards as the law of the land. The highly compensated employee threshold has also reverted to $107,432 per year, down from the aborted $151,164 target that had been scheduled to take effect.[1][3][4]

The formal rescission brings much-needed regulatory certainty to a labor market that has spent the last two years in a state of legal limbo. The saga began in early 2024 when the Biden administration introduced a tiered plan to aggressively expand overtime eligibility. That ambitious rule briefly raised the threshold to $43,888 in July 2024, with a second massive jump to $58,656 slated for January 2025. The initiative aimed to capture millions of lower-level managers who routinely work more than forty hours a week, ensuring they received premium pay for their extra time on the clock.[4][5][6]

However, the aggressive expansion quickly hit a legal brick wall. A federal judge in Texas vacated the rule nationwide in November 2024, arguing that the Department of Labor had exceeded its statutory authority. The court determined that by elevating the salary level to such a high degree, the agency had effectively supplanted the actual job duties of the employees as the primary test for exemption. The legal uncertainty persisted until early 2026, when the government eventually dropped its appeals and the Fifth Circuit Court of Appeals formally dismissed the final litigation, clearing the path for this month's technical amendment.[2][4][5]

So, how does the system actually work now that the dust has settled? To be legally exempt from overtime pay under the Fair Labor Standards Act, an employee must pass three distinct hurdles. Failing even one of these tests means the worker is legally entitled to time-and-a-half pay for any hours worked beyond forty in a single workweek. The first hurdle is the salary basis test. The worker must be paid a predetermined and fixed salary that cannot be reduced based on the quality or quantity of the work performed. If an employer docks pay for a slow afternoon, the salary basis is broken.[6][7]

The second hurdle is the salary level test, which is now firmly cemented at that $35,568 annual mark. Anyone earning below this figure is automatically non-exempt, completely bypassing any evaluation of their daily responsibilities. This bright-line rule ensures that entry-level workers cannot be exploited through a salary structure that demands excessive hours without additional compensation. If a worker earns $30,000 a year, they are guaranteed overtime pay, regardless of how important their job title sounds or how much managerial authority they supposedly wield.[6][7]

The third, and arguably most crucial hurdle, is the duties test. A common myth in the modern workplace is that a fixed salary and a "manager" title automatically eliminate overtime rights. In reality, the law requires that the employee's primary duties genuinely involve executive, administrative, or professional tasks. If an assistant manager spends the vast majority of their shift performing the same tasks as hourly employees—ringing up customers, cleaning facilities, or stocking shelves—they likely remain non-exempt. The duties test ensures that only genuine decision-makers and specialized professionals are excluded from overtime protections.[6][7]

For those at the upper end of the pay scale, the rules operate a bit differently through the Highly Compensated Employee exemption. With the threshold now restored to $107,432 per year, the federal system provides a streamlined, simplified duties test for individuals earning substantial annual compensation. As long as these high earners perform at least one of the exempt duties of an executive, administrative, or professional employee, they are excluded from overtime protections. This dual-track system allows employers to easily classify their top earners while maintaining stricter scrutiny for mid-level managers hovering near the $35,568 baseline.[3][6]

While the federal baseline is now settled, the compliance landscape remains complex because federal law is only half the equation. Workers and employers must still navigate a patchwork of state laws that often supersede federal regulations. States like California and New York maintain significantly higher salary thresholds, and employers must always follow the law that is most protective of the employee. A manager in Los Angeles, for example, must earn substantially more than the federal $35,568 minimum to be exempt from state overtime requirements.[6][7]

The restoration of the 2019 threshold is widely viewed as a significant victory for small businesses and industry groups. These organizations argued that the 2024 spikes would have forced them to demote salaried managers to hourly roles or cut base pay to offset the sudden surge in overtime costs. For many independent retailers and hospitality businesses operating on razor-thin margins, the lower threshold preserves workplace flexibility and prevents a sudden spike in labor expenses that would inevitably be passed on to consumers.[5]

Conversely, labor advocates point out that the $35,568 threshold leaves a substantial gap in worker protection. They argue that inflation has significantly eroded the protective power of a standard set back in 2019. Legislative efforts are already brewing to address this perceived shortfall; for instance, a recently proposed Senate bill aims to establish a new minimum threshold starting at $45,000 and automatically updating it annually to match national wage percentiles. This signals that while the regulatory rule is settled, the broader legislative debate over fair compensation continues.[8]

Ultimately, the Department of Labor's formal rescission closes a chaotic and frustrating chapter in American labor law. By thoroughly understanding the mechanics of the salary basis, the salary level, and the duties tests, both employees and employers can now approach salary negotiations and workforce classification with renewed confidence and clarity. Workers are much better equipped to advocate for the overtime pay they are legally owed, while businesses can conduct comprehensive internal audits without the looming threat of sudden regulatory shifts. The rules of the game are finally clear, allowing the modern workplace to move forward on solid legal ground.[2][6]