After a year of “reconsideration,” the United States Department of Labor (DOL) has abandoned its attempt to dramatically increase the minimum salary thresholds for the white-collar overtime exemptions under the Fair Labor Standards Act (FLSA). On May 14, 2026, after multiple court challenges, the DOL announced it is rescinding the 2024 Biden Era Final Rule (the 2024 Rule), which was expected to expand overtime eligibility to four million previously exempt workers. For many employers, particularly in Texas and other jurisdictions that do not impose higher state-law salary thresholds, the practical result is that the federal salary threshold remains relatively low. As a result, future exemption challenges are likely to focus less on whether an employee clears the salary threshold and more on whether the employee actually performs exempt duties and is paid under a compensation structure that satisfies the FLSA’s salary-basis requirements.
The DOL’s action formally reinstates the DOL’s 2019 minimum salary thresholds of $684/week ($35,568/year) for the executive, administrative and professional employee (EAP) exemptions and $107,432/year for highly compensated employee (HCE) exemption.
The 2024 Rule would have increased the minimum salary levels for the EAP exemptions from the 2019 thresholds by more than 1.5 times to $1,128/week ($58,656/year) effective January 1, 2025. For the HCE exemption, the 2024 Final Rule increased the yearly compensation threshold to $151,164 on January 1, 2025. The 2024 Rule also included controversial automatic increases every three years.
Brief History of DOL Attempts to Increase Salary Thresholds
The DOL has faced significant resistance in its efforts over the past two decades to increase the salary thresholds. In 2004, the DOL regulations set the minimum salary threshold for EAP exemptions at $455/week ($23,660/year) and the HCE exemption at $100,000/year. In 2016, during the Obama administration, the DOL’s Rule attempting to double the EAP salary threshold to $913/week ($47,466/year) and the HCE threshold to $134,004/year, and to implement future automatic increases, was struck down by a Texas federal district court. In response, the DOL’s 2019 Rule established a more limited salary threshold increase to $684/week for EAP exemptions and $107,432/year for the HCE exemption and eliminated the automatic increases. The DOL’s recent efforts to substantially increase the salary threshold and impose future automatic increases in the 2024 Rule similarly failed, as multiple federal district courts set aside and vacated the 2024 Rule.[1]
The Decision to Rescind
Unlike the DOL’s action after its failed 2016 Rule, the DOL did not propose a more conservative salary increase threshold in response to challenges to the 2024 Rule. Instead, in State of Texas & Plano Chamber of Commerce, et. al v United States Department of Labor, the DOL filed a motion requesting that the Fifth Circuit hold the case in abeyance pending the conclusion of the agency’s review of the challenged rule.[2] Ultimately, the parties stipulated to a dismissal, and in early May 2026, the Fifth Circuit issued a dismissal in these cases.[3]
While some predicted that the DOL’s reconsideration might result in a more realistic proposed rule, the DOL simply announced its decision to rescind the 2024 Rule on May 14, 2026, and return to the 2019 Rule.
What to Expect Next From the DOL
The DOL’s rescission signals a pause in salary-threshold rulemaking for now. Courts have rejected both large increases to the salary thresholds and mechanisms that would raise those thresholds automatically in the future. Those courts have criticized the DOL’s prioritization of the salary component of the exemption test over the duties component. The FLSA itself speaks to the minimum wage and overtime exemption for those “employed in a bona fide executive, administrative or professional capacity” with no mention whatsoever of salary. Those courts also expressed concern that the proposed salary levels would make salary, rather than duties, the controlling factor for determining whether an employee qualifies for an exemption. A few even question the DOL’s authority to set minimum salary thresholds at all. As a reminder, the 2019 DOL Rule does not affect employers operating in states or cities imposing higher salary thresholds for the EAP or HCE exemptions.
The DOL is unlikely, however, to abandon the use of salary thresholds altogether. Future rulemaking may attempt a more modest increase that responds to the concerns raised by the courts.
Next Steps to Consider
Employers who previously reclassified exempt employees as non-exempt or increased the salaries of exempt employees to comply with the defunct 2024 Rule may, but will likely not, undo the actions already taken. Before making any changes, employers should consider the potential impact on employee relations, retention and workforce planning.
The court views on the importance of duties rather than the level of salary provide practical guidance for employers’ future actions. With the 2024 Rule now rescinded and the 2019 thresholds restored, the salary level will be a less meaningful dividing line for many employers, particularly in Texas and other jurisdictions without higher state or local thresholds. That does not mean exemption risk has disappeared. Rather, the likely focus of future misclassification challenges will return to the issues that have historically driven FLSA litigation: whether the employee actually performs exempt duties and whether the employee is paid on a compliant salary basis.
Employers may therefore want to use this opportunity to take a fresh look at classification decisions, focusing first on the actual duties of the position. Titles that sound exempt, such as “manager,” “supervisor,” “administrator” or “engineer,” are not enough. Employers should confirm that the employee’s day-to-day work actually involves the management authority, discretion, independent judgment or professional skill required for the exemption being claimed. Positions that often merit closer review include working supervisors, field leads, project managers or coordinators with limited independent authority, dispatch and logistics roles, safety and compliance personnel, inspectors, technicians and other employees whose titles may sound exempt, but whose actual duties may be more operational or production oriented.
Employers also should not lose focus on the salary basis requirement. A high salary alone does not make an employee exempt. Employers can still face overtime exposure if the employee’s actual work does not support the claimed exemption or if the employer’s pay practices undermine the salary basis requirement. This is particularly important in industries where day rates, shift rates, hitch compensation, field premiums, project bonuses and other variable compensation are common. Day rates, in particular, can present significant risk unless the pay plan includes a guaranteed amount that satisfies the salary basis regulations. Other forms of variable compensation may be permissible, but they should be reviewed carefully to ensure that they are paid in addition to, and not in place of, a compliant salary and that the employer is not making improper salary deductions based on hours worked, partial day absences, lack of available work or other circumstances that could defeat the exemption.
[1] E.g., State of Texas & Plano Chamber of Commerce, et.al. v United States Department of Labor, et al., No. 4:24-CV 499-SDJ, 756 F.Supp.3d 361 (E.D. Tex. Nov. 15, 2024); Flint Avenue, LLC v U.S. Department of Labor, No. 5:24-CV-130-C (N.D. Tex. Dec. 30, 2024), ECF No. 62.
[2] Unopposed Motion to Hold Appeals in Abeyance, State of Texas, et al., v. United States Department of Labor, et. al., No. 24-40777 (5th Cir. April 24, 2025), ECF No. 37.
[3] State of Texas, et al., v. United States Department of Labor, et. al., No. 24-40777 (5th Cir. May 5, 2026), ECF No. 82. The second appeal was also dismissed. Flint Avenue, LLC v U.S. Department of Labor., No. 25-10349 (5th Cir. May 7, 2026), ECF No. 58.
