Last Updated on May 18, 2026 by MyHRConcierge

The long-running legal battle over expanded federal overtime eligibility appears to have reached its conclusion. After multiple court challenges and a recent decision by the U.S. Department of Labor (DOL) to withdraw its appeal, the Biden-era overtime rule that sought to significantly raise salary thresholds for overtime exemption is effectively dead. As a result, employers remain subject to the federal overtime exemption standards established in 2019.

For businesses, this development provides clarity, but it also reinforces the importance of properly classifying exempt and nonexempt employees under the Fair Labor Standards Act (FLSA).

The Overtime Rule That Never Fully Took Effect

In 2024, the DOL finalized a rule aimed at expanding overtime eligibility for salaried workers classified under the FLSA’s executive, administrative and professional (“white-collar”) exemptions. The regulation included a phased increase to the minimum salary threshold required for exemption and would have eventually raised the threshold to $58,656 annually ($1,128 per week) beginning January 1, 2025.

The rule also introduced automatic updates to salary thresholds every three years, a feature intended to keep exemption standards aligned with wage growth over time. However, before the full implementation could occur, legal challenges emerged.

Federal Courts Halt the Expansion

On November 15, 2024, a federal judge in Texas permanently blocked the overtime rule, ruling that the DOL exceeded its authority by placing too much emphasis on employee compensation rather than job duties when determining exemption eligibility. The court found that the FLSA focuses on the nature of an employee’s work, and that salary thresholds cannot overshadow the duties analysis required by law.

Additional court rulings later vacated the regulation, creating uncertainty around whether the DOL would continue defending the rule through the appeals process. That uncertainty ended when the agency agreed to dismiss its appeal, effectively leaving the court decisions intact and ending the legal path forward for the expanded overtime framework.

What Salary Threshold Applies Now?

With the 2024 overtime rule blocked, employers revert to the salary threshold established under the 2019 regulations.

Currently, exempt executive, administrative, and professional employees generally must earn at least $35,568 annually or $684 per week to satisfy the federal salary level requirement for exemption. 

Importantly, meeting the salary threshold alone does not make an employee exempt from overtime.

Why Employers Still Struggle With Classification

Although salary thresholds receive the most public attention, classification errors frequently stem from misunderstandings around job duties.

According to a 2026 summary of employer overtime compliance challenges by SHRM, organizations report significantly more difficulty evaluating exempt status under the duties test than under salary requirements. Employers particularly struggle when employees perform a mix of exempt and nonexempt responsibilities, making classification decisions less straightforward.

For example, a manager who spends most of their time performing frontline operational work rather than directing staff may not satisfy exemption requirements, even if they receive a salary and hold a supervisory title.

State Laws May Be More Restrictive

Federal law establishes a baseline, but employers must also comply with state-specific wage-and-hour requirements. Some states apply stricter exemption standards, including higher salary thresholds or more demanding duties requirements.

For example, in California, exempt employees generally must spend more than half of their work time performing exempt duties. The state also imposes a significantly higher salary threshold tied to minimum wage requirements, with exempt executive, administrative, and professional employees subject to higher minimum compensation standards than federal law.

Multi-state employers should review classifications carefully to ensure compliance across all operating locations.

What Employers Should Do Now

The death of the expanded overtime rule may relieve some immediate payroll pressure for employers that anticipated salary increases or employee reclassification. However, this is not the time to become complacent.

Organizations should take proactive steps to reduce wage-and-hour risk, including:

• Reviewing exempt and nonexempt employee classifications
• Auditing job descriptions to ensure they reflect actual duties
• Evaluating employees who perform blended exempt and nonexempt work
• Monitoring state overtime requirements that may exceed federal standards
• Training managers and HR professionals on wage-and-hour compliance

Misclassification claims remain one of the most common- and costly- employment law risks for employers.

Final Takeaway

While the Biden-era overtime expansion has effectively died in court, overtime compliance remains a high-priority issue for employers. The current federal salary threshold may remain unchanged for now, but proper classification still depends on more than compensation.

Employers should use this period of regulatory certainty to revisit exemption decisions, strengthen documentation and confirm that employees meet both salary and duties requirements under federal and state law.

For more information on how to enhance your organization’s compliance efforts, contact MyHRConcierge at 855-538-6947 ext.108, ccooley@myhrconcierge.com. Or, schedule a convenient consultation below: