The History of the FLSA Overtime Exemption Rule (1938 to 2026)

The 2004 Rule Created a Single Standard for Exempt Employees

The DOL rewrote the white-collar exemption rules in 2004. The final rule was published April 23, 2004, and took effect in August 2004.

It replaced the long and short tests with one standard duties test for each exemption and one salary level for all three: $455 a week, or $23,660 a year. It also created the highly compensated employee (HCE) exemption, with a $100,000 total yearly pay level and a lighter duties test.

The $455 level lasted more than 15 years, until January 1, 2020.

The 2016 Rule Was Blocked Before It Took Effect

In May 2016, the DOL published a rule to raise the salary level to $913 a week ($47,476 a year), starting December 1, 2016. That was the 40th percentile of weekly pay for full-time salaried workers in the lowest-wage Census Region, the South.

The HCE level would have gone up to $134,004. Both levels would also have updated automatically every three years, starting January 1, 2020.

A group of states led by Nevada sued the DOL in federal court in Texas. On November 22, 2016, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction that stopped the rule nine days before it was due to start.

On August 31, 2017, the same court ruled the 2016 rule invalid in Nevada v. U.S. Department of Labor. It found the rule made overtime status depend mainly on a salary level, which went beyond the DOL's authority. The $455 level stayed in effect.

The DOL Asked for Public Input From 2017 to 2019

While the case was in court, the DOL published a Request for Information on July 26, 2017, asking how the overtime rules should be updated. It received more than 200,000 comments.

From September 7 to October 17, 2018, the DOL held listening sessions in all five of its Wage and Hour regions and in Washington, DC. It proposed a new rule on March 22, 2019.

The 2019 Rule Raised the Threshold to $684 a Week

The DOL published its final rule on September 27, 2019, and it took effect January 1, 2020. It's the rule that applies today. Here's what it set:

• The standard salary level went from $455 to $684 a week ($35,568 a year).
• The HCE level went from $100,000 to $107,432 a year, including at least $684 a week paid on a salary or fee basis.
• Employers can use nondiscretionary bonuses and incentive pay, including commissions, to meet up to 10% of the standard salary level, as long as they're paid at least once a year.
• Special salary levels apply in some places: $455 a week in Puerto Rico, the U.S. Virgin Islands, Guam and the Northern Mariana Islands, and $380 a week in American Samoa.
• The motion picture industry has its own base rate of $1,043 a week.
• The rule has no automatic updates.

The DOL estimated that 1.3 million employees who were exempt at the time would become eligible for overtime under the new level.

How the 10% Bonus Rule Works

Here's how the math works for an employee with a base salary plus nondiscretionary bonuses.

If the bonuses come up short at the end of a 52-week period, you can make one catch-up payment within one pay period to close the gap. The catch-up can't be more than 10% of the salary level, and it only counts toward the 52 weeks that just ended.

The 2024 Rule Was Vacated and Then Rescinded

The DOL proposed a new rule on September 8, 2023, and announced the final rule on April 23, 2024. It was published in the Federal Register on April 26, 2024, and had three parts:

• On July 1, 2024, the salary level rose to $844 a week ($43,888 a year), and the HCE level rose to $132,964.
• On January 1, 2025, the salary level was set to rise to $1,128 a week ($58,656 a year), and the HCE level to $151,164.
• Starting July 1, 2027, both levels were set to update automatically every three years using current wage data.

The first increase took effect on July 1, 2024, for every employer except the State of Texas as an employer, because a federal court had already blocked the rule for Texas in an earlier order.

On November 15, 2024, the U.S. District Court for the Eastern District of Texas vacated the whole rule nationwide in Texas v. U.S. Department of Labor, finding that the DOL had gone beyond its authority under the FLSA. A second Texas court vacated it again on December 30, 2024, in Flint Avenue, LLC v. U.S. Department of Labor. The $1,128 level never took effect, and the federal level went back to $684 a week.

The DOL first appealed both decisions to the Fifth Circuit Court of Appeals. After the DOL dropped its appeals, the court dismissed them on May 5 and May 7, 2026.

On May 15, 2026, the DOL published a final rule in the Federal Register that removed the 2024 language from the regulations and restored the 2019 text. The DOL called it a technical amendment, and it took effect the same day.

FLSA Overtime Exemption Rules in 2026

Here's where the federal rules stand as of October 2026, according to the DOL:

• The standard salary level is $684 a week, or $35,568 a year.
• The HCE level is $107,432 a year, including at least $684 a week paid on a salary or fee basis.
• Computer employees paid by the hour must earn at least $27.63 an hour to be exempt.
• Teachers, doctors, lawyers and outside sales employees don't have to meet a salary level.
• The salary levels don't update automatically.

In September 2024, the Fifth Circuit also upheld the DOL's power to set a minimum salary for these exemptions in a challenge to the 2019 rule. So the salary test itself remains part of federal law, and any change to the amount would come through a new DOL rule. Our guide to the federal overtime salary threshold covers the current levels in more detail.

If You Raised Salaries in 2024

Some employers raised salaries to $844 a week in July 2024 to keep employees exempt. With the federal level back at $684 a week, keeping those raises is now a business decision.

Before you lower anyone's pay or move them back to exempt status, think about employee morale, your state's rules and any written pay agreements.

How to Check Your Exempt Employees

1. List every salaried employee you treat as exempt.
2. Compare each salary to $684 a week ($35,568 a year) and to your state's level, if it's higher.
3. Check that each person's main job duties match an exemption. Our guide on how to classify employees explains the duties tests.
4. Track hours for anyone who doesn't qualify, and pay overtime for every hour over 40 in a workweek. Our guide on how to calculate overtime pay walks through the math.
5. Check for DOL and state updates at least once a year.

If some of your salaried employees no longer qualify as exempt, it's a good time to begin tracking employee time so their overtime hours are recorded accurately.

References

• Federal Register: DOL final rule implementing the court judgments (May 15, 2026)
• DOL news release on restoring the 2019 regulations (May 14, 2026)
• DOL: current earnings thresholds for the white-collar exemptions
• DOL: 2024 final rule (published April 26, 2024, later vacated)
• Federal Register: DOL final rule (September 27, 2019)
• DOL fact sheet on the 2019 final rule
• DOL Fact Sheet #17A: Exemption for Executive, Administrative, Professional, Computer and Outside Sales Employees
• Federal Register: DOL Request for Information on the overtime rule (July 26, 2017)
• Congressional Research Service: Overtime Exemptions in the FLSA for Executive, Administrative, and Professional Employees (R45007)
• Congressional Research Service: A Historical Sketch of the Overtime Pay Requirements of Section 13(a)(1) (RL32088)

This article is general information about federal law and isn't legal advice. For your situation, check with your state labor department or an employment attorney.