You classify a manager as exempt from overtime and pay a fixed salary. Then someone asks whether that salary still meets the federal threshold. Confusion around the Fair Labor Standards Act overtime rules has been common in recent years. In 2026 the picture is clearer than it was during the litigation over the 2024 rule. The federal salary level for most white-collar exemptions has returned to the 2019 standard, yet the duties test and state-law variations remain just as important as ever.

Current Federal Salary Thresholds

As of mid-2026 the U.S. Department of Labor has formally restored the 2019 regulations after federal courts vacated the higher 2024 thresholds. To qualify for the executive, administrative, or professional exemption, an employee must generally be paid on a salary basis of at least $684 per week, which annualizes to $35,568. For the highly compensated employee exemption the total annual compensation threshold is $107,432, of which at least $684 per week must be paid on a salary or fee basis.

These numbers are the federal floor. Meeting the salary level is only one part of the test. The employee’s primary duties must still satisfy the specific requirements for the claimed exemption.

The Three-Part Test for White-Collar Exemptions

An employee is exempt from overtime only if all three elements are met: the salary-basis test, the salary-level test, and the duties test. The salary-basis requirement means the employee receives a predetermined amount each pay period that is not subject to reduction because of variations in the quality or quantity of work. The salary-level requirement is the $684 weekly figure noted above. The duties test examines the actual day-to-day work. Job titles alone never control the analysis.

Executive employees must primarily manage the enterprise or a recognized department and direct the work of at least two full-time employees. Administrative employees must perform office or non-manual work directly related to management or general business operations and exercise discretion and independent judgment on significant matters. Professional employees generally need advanced knowledge in a field of science or learning customarily acquired through prolonged specialized instruction.

Highly Compensated Employees and Other Exemptions

Employees who earn at least $107,432 in total annual compensation and customarily perform at least one exempt duty may qualify under the streamlined highly compensated employee test. Outside sales employees, certain computer professionals, and some other categories follow different rules that may not rely on the same salary threshold. Employers should examine each exemption carefully rather than assuming a high salary automatically solves the problem.

State Law Variations That Often Exceed Federal Requirements

Several states set higher salary thresholds or impose additional requirements. California, New York, Washington, Colorado, and others maintain their own minimums that can substantially exceed the federal $684 weekly figure. In those jurisdictions an employee who meets the federal salary level may still be non-exempt under state law and therefore entitled to overtime. Multi-state employers must apply the more protective standard for employees working in those states.

Common Compliance Pitfalls

Misclassification remains one of the most frequent and expensive wage-and-hour problems. Paying a salary does not by itself create an exemption. Docking exempt employees for partial-day absences can destroy the salary basis. Treating an employee as exempt while the actual duties are primarily routine or non-discretionary invites liability. Failure to track hours for non-exempt employees, even when they are paid a salary, creates overtime exposure.

Hypothetical example: a company pays a “manager” $40,000 per year and assumes the federal threshold is satisfied. The employee spends most of the day performing the same production work as the team and exercises little genuine supervisory authority. Despite the salary, the duties test is not met and overtime is owed for hours over 40.

Practical Steps for Employers in 2026

Review every currently exempt position against both the restored federal salary level and the applicable duties test. Confirm that any employee treated as highly compensated meets the total compensation threshold and performs at least one exempt duty. Check state-specific salary levels and overtime rules for every location where you have employees. Update job descriptions so they accurately reflect actual duties rather than aspirational language. Train managers on the difference between exempt and non-exempt status and on the importance of not making improper deductions from exempt salaries.

When reclassifying an employee from exempt to non-exempt, communicate the change clearly, begin tracking hours, and ensure overtime is calculated correctly going forward. Retroactive liability for past misclassification can be significant, so documentation of the review process is valuable.

The federal salary threshold for most white-collar exemptions is once again $684 per week, and the highly compensated threshold sits at $107,432. Those numbers provide a stable baseline, yet they never stand alone. The duties test, the salary-basis requirement, and often higher state thresholds determine whether an employee is truly exempt. Employers who treat the salary figure as the only compliance checkpoint expose themselves to back-wage claims, liquidated damages, and attorney fees. Conduct a fresh classification audit, align pay and duties with the current rules, and keep clear records. Doing the work now is far less costly than defending a misclassification case later.

FAQ

What is the federal salary threshold for overtime exemptions in 2026?
Most executive, administrative, and professional employees must be paid at least $684 per week on a salary basis. The highly compensated employee threshold is $107,432 in total annual compensation.

Did the higher 2024 salary levels ever take permanent effect?
No. Federal courts vacated the 2024 rule, and in May 2026 the Department of Labor formally restored the 2019 thresholds through a technical amendment.

Is a high salary enough to make an employee exempt?
No. The employee must also meet the applicable duties test. Salary alone never creates an exemption under the FLSA.

Do state laws matter if I meet the federal threshold?
Yes. Several states require higher salary levels or impose additional requirements. Employers must follow the more protective standard.

What should employers do right now?
Audit current exempt classifications against both the federal salary level and the duties test, check state-specific rules, and correct any misclassifications promptly while documenting the review.