DOL Restores Lower Overtime Salary Thresholds, Reversing 2024 Exemption Hike

The tension at the heart of federal labor law has always been a balancing act: guaranteeing fair compensation for extra hours worked without bankrupting the businesses that provide those jobs. For the past two years, that tension has centered on a single, highly contested number: the salary threshold below which workers are automatically entitled to time-and-a-half overtime pay.[3]

That debate has now reached a definitive resolution. On May 14, 2026, the U.S. Department of Labor (DOL) issued a technical amendment formally rescinding its 2024 overtime rule and restoring the previous regulatory text.[1]

The immediate financial reality for employers and employees is stark: the federal salary threshold for the "white-collar" overtime exemption has reverted to $684 per week, or $35,568 annually. This is a sharp reduction from the $58,656 annual threshold that the 2024 rule had scheduled to take effect.[2]

To understand the mechanics of this reversal, it is necessary to examine how the Fair Labor Standards Act (FLSA) governs overtime. The FLSA generally requires employers to pay time-and-a-half to employees who work more than 40 hours in a single workweek.[1]

However, the law carves out exemptions for "bona fide executive, administrative, and professional" employees. Qualifying for this exemption requires passing a strict three-prong test.[1][3]

First, the employee must be paid on a predetermined and fixed salary basis. Second, that salary must meet a minimum specified amount—the salary level test. Third, the employee's primary job duties must involve executive, administrative, or professional responsibilities—the duties test.

The 2024 rule attempted to aggressively update the second prong. It finalized a two-step increase, raising the standard salary threshold to $43,888 in July 2024, and then to $58,656 in January 2025.[2]

The rule also included a mechanism to automatically update the threshold every three years based on wage data, and it raised the threshold for "highly compensated employees" to $151,164. The DOL estimated this would have expanded overtime eligibility to millions of additional workers.[3]

However, the rule faced immediate legal challenges from business groups and states, culminating in a November 2024 ruling by the U.S. District Court for the Eastern District of Texas.[2]

The federal judge struck down the rule nationwide, arguing that the DOL had exceeded its statutory authority. The court's rationale was that by raising the salary threshold so drastically, the DOL was effectively making salary the sole determining factor for exemption, thereby unlawfully supplanting the duties test established by Congress.[2][3]

Following the district court's decision, the rule was placed on hold. The final blow came on May 5, 2026, when the U.S. Court of Appeals for the Fifth Circuit dismissed the government's appeals after the current administration stopped defending the rule in court.

The DOL's May 2026 technical amendment simply aligns the Code of Federal Regulations with these final court judgments. Because it is a technical fix implementing a court order, the amendment took effect immediately without a standard notice-and-comment period.

For corporate HR departments and payroll managers, the rollback provides a measure of regulatory certainty after two years of whiplash. Employers who had preemptively raised salaries or reclassified workers to comply with the blocked 2024 rule must now decide whether to maintain those changes or revert to the 2019 standards.

Legal analysts advise that while the federal threshold is back to $35,568, employers cannot simply rely on salary alone. The duties test remains a critical and heavily scrutinized component of the exemption.[3]

Furthermore, the federal rollback does not preempt stricter state laws. Employers operating in states like California, New York, and Washington must still comply with state-level salary thresholds that significantly exceed the federal minimum.[3]

While the regulatory battle appears settled for now, legislative efforts continue. Lawmakers have introduced the Restoring Overtime Pay Act in Congress, which seeks to codify higher thresholds into law, though it faces steep hurdles in a divided legislature.

Ultimately, the restoration of the 2019 thresholds shifts the burden of compensation strategy back to employers, who must balance payroll constraints against the need to attract and retain talent in a competitive labor market.[3]