The DOL restored the $684/week FLSA overtime threshold in May 2026. Learn what changed, which states set higher bars, and how to keep your small business compliant.
Maria runs a 14-person landscaping company in Denver. In early 2025 she promoted her field supervisor, Carlos, to an administrative coordinator role, gave him a $38,000 salary, and stopped tracking his hours — assuming the title change made him overtime-exempt. For most of the year that worked fine. Then, in January 2026, Colorado raised its own overtime exemption threshold to $1,111.23 per week ($57,783 per year). Carlos's salary was now below Colorado's state line, which meant he was legally entitled to overtime pay for every hour over 40 per week, retroactively.
Maria had no payroll alert, no classification review scheduled, and no HR software flagging the gap. By the time her accountant caught the discrepancy in Q1, she owed three months of back-pay plus penalties — a bill that nearly wiped out her seasonal cash reserve.
Her situation is not unusual. The landscape of U.S. overtime law changed significantly in late 2024 and into 2026, with a federal rule reversal, a court vacatur, and a May 2026 DOL technical amendment all landing within 18 months. If you employ salaried workers and haven't reviewed their classification status recently, now is the moment to act.
What Just Changed at the Federal Level
On May 14–15, 2026, the U.S. Department of Labor (DOL) published a technical amendment in the Federal Register that formally rescinded the Biden Administration's 2024 overtime rule. That 2024 rule had attempted to raise the federal salary threshold in two steps — first to $844/week in July 2024 and then to $1,128/week in January 2025 — with automatic updates every three years thereafter.
A federal district court in Texas vacated the entire 2024 rule in November 2024, finding that the DOL had exceeded its authority by making salary the dominant factor for exemption status rather than job duties. The Trump-era DOL dropped both appeals in early 2026, and the Fifth Circuit dismissed the cases. The May 2026 amendment simply made the regulatory record match reality.
The operative federal standard as of today:
- Standard salary level: $684 per week / $35,568 per year
- Highly compensated employees (HCE): $107,432 per year total annual compensation
- No automatic future increases — any future changes require a new rulemaking process
This is the same threshold that has been in place since 2019. If your employees were classified correctly under that standard in 2024, the federal floor has not moved. But "federal" is only half the story.
The Three-Part Exemption Test Still Controls
Regardless of which salary number applies, an employee must pass all three tests to be lawfully exempt from overtime:
- Salary-basis test — The employee must receive a fixed, predetermined salary that is not reduced because of variations in quality or quantity of work.
- Salary-level test — The salary must meet or exceed the applicable minimum threshold (federal or, if higher, state).
- Duties test — The employee's primary job duties must qualify as executive, administrative, or professional as defined by DOL regulations.
A common small-business mistake is stopping at the salary level. A title change or a salary bump alone does not create an exemption. The duties test is equally binding and is the one most likely to fail audits.
State Thresholds: Where the Real Risk Lives in 2026
Because federal law sets a floor — not a ceiling — states may (and several do) establish higher thresholds. Employers must follow whichever standard is more protective of the employee.
| State | 2026 Minimum Weekly Salary | Annual Equivalent | Notes |
|---|---|---|---|
| Federal (all other states) | $684 | $35,568 | Restored May 2026 |
| Colorado | $1,111.23 | $57,783 | Increased Jan 1, 2026 |
| New York (NYC + Nassau/Suffolk/Westchester) | $1,275.00 | $66,300 | Increased Jan 1, 2026 |
| New York (rest of state) | $1,199.10 | $62,353 | Increased Jan 1, 2026 |
| Washington | $1,541.70 | $80,168 | 2.25x state minimum wage — highest in the nation |
| California | ~$1,352 | $70,304 | 2x state minimum wage formula |
If your business operates — or has remote employees working — in any of these states, you must apply the state threshold for those employees.
Four Compliance Actions to Take Right Now
The regulatory dust has settled for 2026, which means there are no more "waiting for the courts" deferrals. Here is what every small business employer should do before the next payroll cycle:
1. Audit every salaried-exempt classification. Pull a list of all employees classified as exempt. For each one, confirm: (a) their salary clears the applicable threshold (federal or state), (b) they are paid on a true salary basis with no improper deductions, and (c) their actual day-to-day duties — not their job title — satisfy the duties test.
2. Map employees to their work state, not just your company's headquarters state. Remote and hybrid employees who primarily work in Colorado, New York, Washington, or California are subject to those states' thresholds. A salaried employee working from Seattle at $50,000/year is not overtime-exempt under Washington law, full stop.
3. Review HCE classifications separately. The $107,432 HCE threshold allows a simplified duties test, but the employee must still receive at least $684/week on a salary or fee basis and customarily perform at least one exempt duty. High compensation alone is not sufficient.
4. Document the classification rationale. If the DOL or a plaintiff's attorney ever challenges a classification, your written record of why the duties test was met is your primary defense. A short memo per employee — summarizing primary duties, percentage of time, and decision rationale — is inexpensive insurance.
What Happens If You Get It Wrong
Misclassification is expensive. Under the FLSA, an employer found to have improperly classified a non-exempt employee can owe:
- Back overtime pay for up to two years (three years if the violation is willful)
- An equal amount in liquidated damages (effectively doubling the back-pay liability)
- Attorney's fees and court costs
- State penalties on top of federal exposure
For a 10-person operation where even two or three employees were misclassified for a year, total exposure can easily reach five figures. State agencies in California, New York, and Washington are among the most aggressive in the country at enforcement.
How Pleelo Helps
Pleelo's HR and Payroll modules are built for exactly this kind of compliance work. You can tag each employee's classification, track salary thresholds by jurisdiction, and set automatic alerts when a salary falls below the threshold required for their work state. When the rules change — as they did three times between 2024 and 2026 — Pleelo surfaces the affected employee records so you can act before the next pay period, not after the next audit.
"Before Pleelo, I had a spreadsheet I updated maybe once a year. Now I get a notification when anything affecting payroll compliance changes. I caught a state threshold issue for our Colorado hire before it cost us anything — that alone paid for the subscription." — Operations Manager, 22-person services firm
No more waiting for your accountant to find the problem in Q1. Compliance is a continuous process, and Pleelo keeps it automated.
The Bottom Line
The federal FLSA overtime threshold is locked at $684/week ($35,568/year) for the foreseeable future following the DOL's May 2026 technical amendment. The 2024 Biden-era increases are gone. But state thresholds in Colorado, New York, Washington, and California have moved significantly higher in 2026, and those are the numbers that will drive most small-business exposure this year.
Classify carefully. Document your reasoning. Watch state thresholds, not just federal ones. And if you manage payroll manually or in a disconnected spreadsheet, consider whether a purpose-built tool can make this continuous work effortless.
