Employers have faced shifting federal overtime rules in recent years, but on May 14, 2026, the U.S. Department of Labor’s (DOL) Wage & Hour Division restored the 2019 overtime framework by removing the now-vacated 2024 rule from federal regulations. However, employers should continue reviewing the overtime rule change and pay practices to stay aligned with current compliance requirements.

2024 Rule

Under the Fair Labor Standards Act (FLSA), many salaried employees are exempt from overtime pay. But not all of them. To qualify as such, an employee must be paid on a salary basis at an amount above a federally mandated threshold and primarily perform certain executive, administrative, or professional duties.

In April 2024, the DOL announced it was rolling out a new final rule on overtime pay eligibility. A major feature of this rule was that it would raise the FLSA minimum annual salary threshold in two stages. First, on July 1, 2024, the threshold would (and did) increase from at least $35,568 to at least $43,888. Then, on January 1, 2025, the threshold was to increase from $43,888 to $58,656.

Under the final rule, a separate overtime exemption was to apply to some highly compensated employees. The threshold for these employees increased to $132,964 on July 1, 2024, and was scheduled to rise to $151,164 on January 1, 2025.

The 2024 final rule also stipulated that the FLSA minimum annual salary threshold would be updated every three years beginning on July 1, 2027. The adjustments would have been based on updated wage data.

Legal Action

But little of that came to pass. On November 15, 2024, the final rule was struck down by the U.S. District Court for the Eastern District of Texas. The decision applied to the 2024 rule in its entirety — including the July 1, 2024 threshold increases that had already taken effect.

In the court’s view, the DOL exceeded its authority in creating the rule because an employee’s exempt vs. nonexempt status must be based primarily on duties, not salary. The rule, according to the court, impermissibly flipped that formula, making salary the dominant factor. The court also found that the agency exceeded its authority by requiring updates to the salary threshold every three years.

The ruling was partly driven by the U.S. Supreme Court’s recent overturning of a legal doctrine known as “Chevron deference.” Under this long-standing doctrine, courts deferred to the interpretations of “permissible” federal agencies, such as the DOL, regarding the actual administration of laws. The Supreme Court’s ruling has helped enable courts to more readily reject agency rules, as demonstrated in this case.

Regulations Restored

Although the DOL appealed the district court’s decision, the 2024 final rule had a slim chance of survival under the current administration. Sure enough, the U.S. Court of Appeals for the Fifth Circuit dismissed those appeals on May 5 and May 7, 2026, leaving the district court orders as final judgments.

On May 14, 2026, the DOL’s Wage and Hour Division announced a technical amendment to formally restore the regulations governing the FLSA’s executive, administrative, and professional exemptions established under the 2019 final rule. The amendment essentially implements the district court’s judgments vacating the 2024 overtime rule and removes the 2024 regulatory text from the Code of Federal Regulations.

As a result, 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 larger 2024 increases and automatic updates every three years are no longer applicable.

Good Time To Review

Proceed carefully if your organization changed job classifications, raised salaries, or adjusted staffing plans in anticipation of the 2024 final rule. Reversing those actions may create employee-relations issues or raise legal questions. Also, state wage and hour laws may impose higher thresholds or different requirements.

Now’s a good time to work with legal counsel to review exempt classifications, confirm job duties tests are satisfied, and document legitimate reasons for any compensation or classification changes. Remember, the salary basis rule and threshold are only parts of the exemption analysis: Employees must also generally perform duties that satisfy the applicable overtime exemption. It’s also a good time to evaluate the payroll, budgeting, and labor-cost implications of overtime-related decisions.

Caution Signal

The long-expected demise of the 2024 rule may give employers a smoother route to federal compliance than they had in previous years. But don’t view it as a green light to ignore the finer points of overtime eligibility and pay. Contact us for help tracking and managing your payroll according to the overtime rule change.