The $58,656 Overtime Rule Is Dead — The Real Number Is $35,568

The $58,656 Overtime Rule Is Dead — The Real Number Is $35,568

If you spent 2024 bracing for a big jump in who you had to pay overtime, you can stop bracing. After more than a year of court fights, the Department of Labor made it official on May 14, 2026: the salary threshold for exempting employees from overtime pay is back to $35,568 a year — the level set in 2019 — not the $43,888 or $58,656 figures the Biden-era Labor Department tried to phase in.

The Fifth Circuit Court of Appeals dismissed the government's remaining appeals on May 5 and May 7, 2026, closing the door on the 2024 rule for good. The DOL's Wage and Hour Division then issued a technical amendment formally restoring the 2019 regulations. For small business owners who've been budgeting around a higher number, or who reclassified employees in anticipation of one, this is worth revisiting now.

What Actually Happened, in Plain Terms

In 2024, the Labor Department finalized a rule that would have raised the salary threshold for the "white collar" overtime exemptions — executive, administrative, and professional employees — in two steps: to $43,888 in July 2024, then to $58,656 in January 2025, with automatic increases every three years after that. Employers, business groups, and several states sued, arguing the DOL had overstepped its authority by focusing so heavily on salary level that it effectively ignored the actual duties test Congress intended.

A federal court in Texas struck the rule down nationwide in November 2024. The Labor Department appealed, but this spring, the Fifth Circuit let those appeals drop. With no more legal avenue left, the DOL simply undid its own rule. The result: the threshold Congress and the DOL set back in 2019 — $684 a week, or $35,568 a year — is once again the law of the land, with no scheduled increases built in.

What This Means If You Run Payroll

The practical effect depends on what you did in 2024:

• If you gave raises to hit $43,888 or higher to keep employees exempt: Nothing forces you to undo those raises, and clawing back pay is legally risky and bad for morale — but you're no longer required to keep salaries that high purely for overtime-exemption purposes going forward.
• If you reclassified employees as non-exempt (hourly, overtime-eligible) to avoid the higher salary requirement: You can now reclassify them back to exempt status if they meet the duties test and earn at least $35,568, though many employers are choosing to leave well-received changes in place rather than flip employees back and forth.
• If you held off on any changes waiting to see how the litigation shook out: You're in the clearest position — the $35,568 threshold is what applies, and it's what you should be using for any new exemption decisions.

Keep in mind salary alone has never been enough to make someone exempt from overtime. Employees also have to pass a duties test showing their actual job responsibilities are executive, administrative, or professional in nature. A $40,000-a-year employee doing largely non-exempt work isn't automatically exempt just because they clear the salary bar.

Don't Forget: States Can Set Higher Thresholds

The federal reversal doesn't touch state law. States including California, Washington, New York, Colorado, and Maine set their own, higher exempt-salary thresholds that already exceed $35,568 — in some cases well above $60,000. If you operate in any of those states, or employ remote workers there, the federal rollback changes nothing for you; you still have to meet the higher state number. This is a case where checking your state's Department of Labor website matters more than the federal news.

It's also a good moment to double check that the workers you're calling exempt — or, separately, the workers you're calling independent contractors — are actually classified correctly under both federal and state rules. Misclassification is one of the most common and expensive mistakes small employers make, and it's worth reviewing our guide on independent contractor vs. employee status if you haven't looked at it recently, since overtime exemption and contractor classification often get confused for each other even though they're separate legal tests.

What To Do This Month

A few concrete steps make sense while this is fresh:

• Pull your current list of exempt employees and confirm each one clears $35,568 a year and passes the duties test — not just the old, higher thresholds you may have been planning around.
• Check your state's exempt salary threshold separately; several states set their own number that's already higher than the new federal floor.
• If you reclassified anyone to hourly in 2024 purely because of the now-dead rule, decide deliberately whether to switch them back, rather than defaulting to inertia in either direction.
• Update your payroll budget and job offer templates, which may still reference the $43,888 or $58,656 figures if they were drafted during the rule's brief life.

Why This Keeps Happening

This is now the second time in a decade a DOL attempt to sharply raise the overtime salary threshold has been struck down in court — a similar rule was blocked in 2016 under the Obama administration. The pattern suggests any future increase is more likely to come through a smaller, more incremental rule that's harder to challenge, rather than another large jump. For now, though, $35,568 is the number, and it's been the number since 2019 — six years without a change is unusual by historical standards, and it means real wages have effectively eroded the threshold's value over time. Whether that prompts a more modest update down the road is worth watching, but there's nothing currently on the DOL's calendar that would raise it again in 2026.

If your business is growing and you're setting salaries for new managers or supervisors, treat $35,568 as the legal floor for exemption eligibility, not a target — most positions genuinely warranting exempt status pay well above that number regardless of what the law requires. As always, keeping clean payroll records tied to your profit and loss statement will make it easier to spot classification issues before they become expensive back-pay claims.

Photo by Tyler Franta on Unsplash