DOL Officially Restores $35,568 Overtime Salary Threshold, Rescinding 2024 Expansion

For millions of American workers and the human resources departments that manage them, a two-year period of regulatory whiplash has finally come to a quiet end. On May 14, 2026, the U.S. Department of Labor (DOL) published a technical amendment in the Federal Register that officially restores the pre-2024 overtime salary thresholds. The move formally rescinds the Biden administration's ambitious 2024 rule, which would have dramatically expanded overtime eligibility, and cements the federal exemption floor at $35,568 per year.

The publication of this amendment is less of a sudden policy shift and more of a formal surrender to the federal courts. In late 2024, a federal judge in Texas struck down the expanded overtime rule, leaving employers in a state of limbo regarding future appeals. By updating the Code of Federal Regulations to reflect the court's decision, the DOL has signaled it will not pursue further litigation, providing a definitive baseline for corporate payrolls heading into the second half of 2026.

To understand the stakes of this regulatory rollback, one must look at the mechanics of the Fair Labor Standards Act (FLSA). Enacted in 1938, the FLSA establishes the standard 40-hour workweek and requires employers to pay time-and-a-half for any hours worked beyond that limit. However, the law carves out specific exemptions for 'white-collar' workers—specifically those employed in a bona fide executive, administrative, or professional capacity.[1][2]

Qualifying for this exemption is not as simple as handing an employee a manager title and a salary. The DOL uses a strict three-pronged test to determine who is truly exempt from overtime protections. First, the employee must be paid on a salary basis, meaning their pay cannot fluctuate based on the quality or quantity of their work. Second, they must perform specific high-level duties that match the legal definition of executive, administrative, or professional work.[1]

The third prong—and the source of the recent legal battles—is the salary level test. An employee must earn a minimum baseline salary to even be considered for the exemption, regardless of how important their daily duties might be. Under the newly restored 2019 framework, that federal threshold sits at $684 per week, which translates to $35,568 annually. Anyone earning below this amount must be paid overtime, full stop.

The 2024 rule attempted to radically alter this equation. Arguing that inflation had eroded the value of the $35,568 threshold and left lower-paid managers vulnerable to exploitation, the DOL finalized a rule to push the threshold to $43,888 in July 2024, and then to $58,656 by January 2025. The rule also included a mechanism to automatically update the threshold every three years based on wage data.

Had the rule survived, it would have reclassified an estimated four million exempt workers as hourly, overtime-eligible employees. Labor advocates championed the change, pointing to a pervasive corporate practice of giving entry-level workers nominal managerial titles—such as 'assistant shift manager' in retail or fast food—specifically to demand 50-to-60-hour workweeks without paying a dime in overtime.[2]

However, industry groups and business coalitions immediately sued to block the expansion. They argued that the DOL had vastly overstepped its statutory authority by making the salary threshold so high that it effectively rendered the duties test irrelevant. A federal district court in Texas agreed, ruling that the FLSA's text requires the exemption to be based primarily on the capacity in which an employee works, not merely how much they are paid.

The court's vacatur of the rule in late 2024 immediately halted the scheduled increases, but the lingering threat of a successful DOL appeal kept corporate compliance officers on edge. The May 2026 technical amendment officially clears that cloud of uncertainty. By removing the vacated language from the federal register, the DOL has given businesses the green light to permanently calibrate their payrolls to the $35,568 standard.[2]

For highly compensated employees, the regulatory cleanup also restores the previous standard. This specific exemption, which requires a less rigorous duties test for top earners, is now officially locked back at $107,432 annually, down from the $151,164 target that the 2024 rule had attempted to establish.

While the federal picture is now crystal clear, human resources experts warn that employers cannot simply default to the $35,568 threshold across the board. The FLSA acts only as a federal floor, not a ceiling. States maintain the right to establish their own, more generous overtime protections, and a growing number of jurisdictions have done exactly that.[2]

In states like California, New York, and Washington, the salary threshold for exempt status is tied to state minimum wage laws and sits significantly higher than the federal standard. For example, employers operating in these states must often pay salaries well over $60,000 to maintain an employee's exempt status, rendering the DOL's recent rollback largely irrelevant for their local workforces.

This geographic patchwork creates a massive compliance headache for distributed companies and remote-first organizations. An employee performing the exact same administrative duties for the exact same $50,000 salary might be perfectly exempt in Texas under the restored federal rules, but strictly non-exempt and entitled to overtime if they log in from a home office in California.[2]

For workers earning between $35,568 and $58,656 in states that follow the federal standard, the DOL's formal retreat means the status quo remains intact. Those who currently work long hours without overtime pay will continue to do so, provided their employers can prove their primary duties genuinely involve executive management, advanced knowledge, or high-level administrative discretion.[2]

Despite the regulatory finality, the political battle over overtime pay is far from over. Congressional Democrats, frustrated by the judicial defeat of the 2024 rule, have introduced the Restoring Overtime Pay Act of 2026. The legislation seeks to bypass the courts entirely by amending the FLSA directly, proposing a statutory increase of the threshold to $45,000, with annual escalators designed to reach $75,000 by the end of the decade.[2]

While the bill faces steep odds in a divided Congress, it underscores that the tension between labor protections and corporate payroll flexibility remains a potent political issue. For now, however, the regulatory pendulum has stopped swinging. Employers finally have the certainty they have been craving, and the rules of the modern American workweek are, at least for the foreseeable future, set in stone.[2]