For the last two years, employers have been trying to keep up with changing overtime rules, salary thresholds, court challenges, and compliance questions.
Now, the U.S. Department of Labor has officially rescinded the 2024 overtime expansion rule, which means the federal overtime exemption thresholds have reverted back to the 2019 standards.
For many business owners, this may feel like a sigh of relief. But this is not the time to assume your overtime classifications are automatically safe.
The real issue was never just salary levels. It is whether employees are actually classified properly under the Fair Labor Standards Act in the first place.
Under the now-rescinded 2024 rule, the salary threshold for most white-collar exempt employees would have increased to $1,128 per week, or approximately $58,656 annually.
That rule was challenged in federal court, struck down and ultimately abandoned when the Trump Administration stopped defending it on appeal.
As of now, the federal salary threshold for executive, administrative, and professional exemptions remains at $684 per week, or $35,568 annually. The highly compensated employee threshold remains at $107,432 annually.
But employers should not view this as permission to ignore overtime compliance.
One of the biggest misconceptions I see is employers believing that paying someone a salary automatically makes them exempt from overtime.
It does not.
To qualify for a white-collar exemption, employees generally must satisfy both the salary basis test and the duties test. In other words, what the employee actually does every day matters just as much as how they are paid.
That is where many businesses get into trouble.
An employee may have a management title but spend most of their time performing non-managerial work. A coordinator may exercise very little independent judgment. A working supervisor may spend most of the day handling the same tasks as hourly staff.
Titles alone do not determine exemption status
Wage-and-hour claims remain one of the most active areas of employment litigation, because these mistakes can become expensive quickly. Misclassification claims often involve unpaid overtime, liquidated damages, attorneys’ fees, and multi-employee exposure.
The rescission of the 2024 overtime rule creates another challenge for employers who have already adjusted salaries or reclassified employees in anticipation of the higher thresholds.
Some businesses increased pay to maintain exempt status. Others converted employees to non-exempt classifications and implemented timekeeping systems. Now employers are asking whether they should reverse those changes.
The answer is not always simple.
Rolling back classifications or compensation decisions without careful analysis can create employee morale issues, retention concerns, internal inconsistencies, and legal risks.
This is why overtime compliance never should be handled as a one-time payroll adjustment. It should be part of a broader wage-and-hour compliance review.
Employers should use this moment to revisit:
- exempt versus non-exempt classifications;
- actual job duties versus written job descriptions;
- remote work and after-hours communications;
- timekeeping practices;
- meal break deductions;
- employee handbook language; and
- state law overtime requirements, which may differ from federal law.
This is an area where many business clients need proactive counseling right now. Understandably, employers are confused by the shifting rules, and many are unsure whether their prior compliance decisions should stay in place.
If anything, this is a reminder that wage-and-hour compliance requires ongoing attention — not assumptions.
Not sure if the new/old overtime rule puts you at risk? Call Rubin Employment Law at 973.787.8442, or email legaladmin@alixrubinlaw.com to schedule a consultation.
This blog is for informational purposes only. It is not offered as legal advice, nor is it intended to create an attorney-client relationship with any reader. Consult with a competent local employment counsel to determine how the matters addressed here may affect you.
0 Comments