In 2024, the U.S. Department of Labor finalized a rule that would have raised the minimum salary for most exempt employees in two steps. Many small employers adjusted pay or reclassified roles to prepare. Then a federal court struck the rule down. If you made changes in 2024, or held off to see what would happen, this is a good time to confirm that your classifications still hold up.
What changed, and what changed back
Under the Fair Labor Standards Act (FLSA), most employees must be paid overtime at one and a half times their regular rate for hours worked over 40 in a workweek. The common "white-collar" exemptions for executive, administrative, and professional employees remove that requirement, but only when an employee meets three tests: they are paid on a salary basis, their salary meets a minimum level, and their actual job duties fit the exemption.
The 2024 rule would have raised the minimum salary level from $684 per week ($35,568 per year) to $844 per week on July 1, 2024, and then to $1,128 per week on January 1, 2025. On November 15, 2024, the U.S. District Court for the Eastern District of Texas vacated the rule nationwide in State of Texas v. U.S. Department of Labor, including the increase that had already taken effect in July.
As a result, the federal salary threshold returned to the level set in 2019: $684 per week. The threshold for the highly compensated employee exemption also returned to its 2019 level of $107,432 per year.
The salary threshold is only one of three tests
A common myth is that paying someone a salary makes them exempt from overtime. It does not. An employee earning well above the threshold is still owed overtime if their duties do not fit an exemption. Salary level is the easiest test to check, which is why it gets the headlines. The duties test is where most misclassification happens.
Consider two common examples. An office manager who mostly performs routine clerical work and follows established procedures, without exercising real discretion and independent judgment on significant matters, may not qualify for the administrative exemption, even with a comfortable salary. A working supervisor who spends most of the day doing the same work as the team, who does not regularly direct the work of at least two full-time employees, and whose input on hiring and firing carries little weight, may not qualify for the executive exemption.
Your state may set a higher bar
Federal law sets a floor. Some states, including California, New York, Washington, and Colorado, set their own higher salary thresholds for exempt status. North Carolina, South Carolina, and Georgia do not currently set a separate, higher exempt salary threshold, so the federal level generally governs there. If you have employees in more than one state, including remote employees, check the rules where each person actually works.
If you made changes in 2024
Employers responded to the 2024 rule in different ways, and each path raises its own questions now.
- You raised salaries to keep employees exempt. You are not required to reverse those raises, and reducing pay can damage trust quickly. If you consider changes, remember that many states require advance notice before pay is reduced. In North Carolina, for example, employers must notify employees of changes in promised wages, in writing or through a posted notice, at least 24 hours before the change takes effect.
- You reclassified employees as non-exempt. Those employees must have their hours recorded accurately and be paid overtime for hours over 40 in a workweek. If you plan to move anyone back to exempt status, confirm they meet the duties test, not just the salary test, and communicate the change clearly and in advance.
- You waited. This is still a good moment to review. The court decision did not change the duties tests, and misclassification risk existed before the 2024 rule and exists now.
A practical review checklist
- List every employee you treat as exempt, with their salary, title, and a short description of what they actually do each week.
- Confirm each salary meets the current federal threshold and any higher threshold in the state where the employee works.
- Compare actual duties, not job titles, to the specific exemption you are relying on.
- Confirm exempt employees are paid on a true salary basis, without improper deductions for partial-day absences or for variations in the amount of work.
- For non-exempt employees, confirm all time worked is recorded, including work before and after shifts, and that overtime is calculated on the regular rate, which can include nondiscretionary bonuses.
- Document your conclusions so you can explain each classification later.
A note for churches and nonprofits
Churches and nonprofits are not automatically outside the FLSA. Coverage depends on the organization's activities and on the work individual employees do, and ministers can be treated differently for certain purposes. If you lead a church or nonprofit with paid staff, confirm how these rules apply to your team rather than assuming they do not.
How we can help
Our HR compliance audit includes a full classification review, covering exempt status and independent contractor relationships, with a ranked plan to correct anything we find. If you want ongoing oversight as roles change, a fractional HR director keeps classifications current alongside the rest of your people function.
This article is general information, not legal, tax, or financial advice. Laws and agency guidance change, so confirm current requirements with a qualified professional before acting. Last reviewed September 30, 2026.