The DOL Just Rolled Back the Overtime Rule: What Employers Need to Know

In mid-May 2026, the Department of Labor's Wage and Hour Division formally rescinded the Biden administration's 2024 overtime rule, returning the federal salary threshold for overtime exemptions to the level set by the 2019 regulations.

For many employers, this news landed quietly. The Biden-era rule had already been vacated by two Texas federal courts in late 2024, and the overtime landscape has been in legal limbo since. Now, with the formal rescission, there is clarity, but clarity does not mean employers can simply move on without reviewing their current workforce classifications.

Here is what happened, what it means, and what HR and operations leaders at small and midsize employers should actually do right now.

What the Rule Change Means in Plain Terms

The Fair Labor Standards Act requires employers to pay overtime, at 1.5 times the regular rate, to any non-exempt employee who works more than 40 hours in a workweek. Certain employees can be classified as exempt from this requirement if they meet a three-part test: they are paid above a minimum salary threshold, they are paid on a salaried basis rather than by the hour or by the piece, and their primary job duties qualify for one of the white-collar exemptions, which cover executive, administrative, and professional roles.

The salary threshold is the number that generates the most employer attention, because it is the most concrete and most easily changed.

The 2019 rule, issued under the first Trump administration, set the standard salary level at $684 per week, or $35,568 annually. The Biden administration's 2024 rule attempted to raise that threshold substantially: to $844 per week ($43,888 annually) as of July 2024, with a further increase to $1,128 per week ($58,656 annually) planned for January 2025, plus automatic triennial adjustments going forward.

Federal courts vacated the 2024 rule before most of the increases took effect. After the current administration dropped its appeals of those decisions, the cases were dismissed and the 2024 rule was formally rescinded. The salary threshold is now back at $684 per week for purposes of the white-collar overtime exemptions.

Notably, the rescission also eliminates the automatic adjustment mechanism that would have periodically updated the threshold without further rulemaking. As of now, the threshold is fixed at the 2019 level until the DOL takes further action.

The Part Employers Often Miss: Salary Level Is Only One-Third of the Test

The salary threshold gets most of the attention, but it is only one part of the three-part conjunctive test for overtime exemption. An employee must satisfy all three elements to be classified as exempt.

The second element is the salary basis test: the employee must be paid a fixed, predetermined amount each week regardless of the quantity or quality of work performed. An employee who is paid hourly, by the piece, or who regularly has earnings docked based on work quality does not meet the salary basis requirement, even if they earn well above the threshold.

The third element is the duties test: the employee's primary job function must fall within one of the recognized white-collar exemption categories. For the executive exemption, this means the employee's primary duty is managing the enterprise or a department, they regularly direct the work of at least two full-time employees, and they have authority over hiring or employment status decisions. The administrative exemption requires that the employee's primary duty be office or non-manual work directly related to management or general business operations, with the exercise of discretion and independent judgment on significant matters. The professional exemption applies to employees doing work that requires advanced knowledge in a field of science or learning.

These tests require genuine analysis of what an employee actually does, not just their job title. An employee titled "Manager" who primarily performs the same tasks as the people they nominally supervise may not meet the executive exemption's duties test. Employers who relied on the Biden-era salary threshold to trigger classification reviews, or who have been delaying classification reviews due to the litigation uncertainty, should be looking at duties as carefully as salary levels.

What Employers Should Actually Do Now

Audit salaried exempt employees earning between $35,568 and $43,888. If your organization reclassified any employees as non-exempt when the Biden-era rule briefly took effect in July 2024, or if you were planning to reclassify based on the anticipated increases, you need to revisit those decisions. Employees currently classified as exempt but earning between the old 2019 threshold and the now-vacated Biden threshold are legally exempt under current federal law, assuming they meet the salary basis and duties tests. However, you should confirm this, not assume it.

Do not stop at the federal threshold if you operate in multiple states. Several states have adopted their own overtime thresholds that exceed the federal level. California's salary threshold for overtime exemption is substantially higher than the federal standard. Colorado, New York, and Washington have also adopted state-specific thresholds. Complying with federal law does not mean you are compliant in every jurisdiction where your employees work. The federal rollback has no effect on state thresholds.

Review actual job duties, not just job titles. The DOL and plaintiff's attorneys focus heavily on the duties test in overtime litigation. A thorough classification audit should involve reviewing actual job descriptions, talking with managers about what employees do day to day, and comparing that picture against the exemption criteria. This is especially important for roles that have evolved significantly over the past few years, particularly in organizations where remote work has shifted how employees spend their time.

Document your classification rationale. For employees you classify as exempt, maintain documentation of why that classification is appropriate. This should include the salary level and basis of payment, the applicable exemption category, and a summary of the primary job duties that support the exemption. If a classification is later challenged, this documentation demonstrates that the employer performed a good-faith analysis rather than simply applying the cheapest possible label.

Consider the broader compensation picture. Some employers who made pay adjustments in anticipation of the Biden-era rule may now face questions about whether to maintain those increases. This is primarily a retention and employee relations decision rather than a legal one. Employers who raised wages and now quietly pull them back face real morale and retention risk, particularly in a labor market where employees are already attentive to compensation signals.

Looking Ahead: Will This Change Again?

Almost certainly. Overtime thresholds have been revised under multiple administrations, and the current DOL has signaled its interest in issuing new guidance on the white-collar exemption standards, including salary levels for workers in U.S. territories. The $684 weekly threshold is, in real terms, lower now than it was when first set in 2019, given the wage inflation of the intervening years.

Employers who want to avoid repeated disruption should structure their classification systems so that a threshold change triggers a focused, defined review process rather than a scramble. Knowing which employees fall within $10,000 to $15,000 of whatever the current federal or state threshold is, and having their duties documentation current, means you are positioned to act quickly if the rules change again.

The one consistent mistake employers make in overtime compliance is treating it as a one-time exercise. The law changes, workforces evolve, and job duties shift. Classification accuracy requires periodic attention, not just initial setup.

The Bottom Line

The formal rescission of the Biden overtime rule returns legal clarity to a question that has been unresolved for over a year. The salary threshold is $684 per week at the federal level. State thresholds may be higher. The three-part test still applies in full, and the duties analysis has always been where the real compliance risk lives.

For most employers with 50 to 500 employees, the practical action is straightforward: verify your exempt classifications are accurate, document your rationale, and confirm you are applying the correct threshold in every state where you have employees.

The rule may change again. The obligation to classify correctly does not.

---

Benefits Collective helps employers stay ahead of compliance changes that affect their workforce and compensation strategy. If you have questions about how recent regulatory shifts affect your team, schedule a consultation to review your situation.