The Overtime Threshold on Your Payroll Software Is Probably the Wrong One
If you set a salaried employee's pay sometime in the last two years and assumed you cleared the overtime exemption bar, it's worth checking that assumption again. The federal threshold went up, then got thrown out by a court, then went back down, and most small business owners never got a clear signal that it moved twice. Worse, the number that actually protects you from an unpaid overtime claim was never just the federal one to begin with.
What actually changed, and un-changed
The Department of Labor raised the federal salary threshold for the executive, administrative, and professional overtime exemption to $43,888 a year, effective July 1, 2024, with a second jump to $58,656 planned for January 1, 2025. A federal court in Texas vacated the entire rule on November 15, 2024, including the increase that had already taken effect, ruling that the DOL had exceeded its authority. The result is that the enforceable federal threshold today is back to the pre-2024 number: $684 a week, or $35,568 a year, the same figure the DOL's own site lists as current. If you raised anyone's salary in mid-2024 to clear the higher bar, you're not required to walk it back, but you also can't assume $35,568 is the only number that matters now.
The number that actually applies depends on the state
Several states set their own, higher salary thresholds for the same exemption, and federal law requires employers to use whichever number is more protective of the employee. As of 2026 that includes California ($70,304/year), Washington ($69,305.60/year), New York ($64,350/year in the highest-cost counties), Alaska ($49,545.60/year), and Maine ($43,951/year). A salary that comfortably clears the federal exemption can still fail a state one by tens of thousands of dollars. None of this is exotic or new law, it's just five separate numbers that don't move together, don't get announced on the same day, and don't show up automatically in most small payroll setups built around a single federal figure.
Where this catches a growing small business off guard
The businesses most likely to get burned aren't ignoring the law, they're just tracking one number instead of several. A shift manager reclassified as salaried exempt at $42,000 clears the current federal threshold with room to spare. If that manager works in California or Washington, the same salary is tens of thousands of dollars short of exempt status, which means every week of overtime they've worked since the reclassification is now a wage claim waiting to happen. The exposure doesn't announce itself. It sits quietly until an employee leaves, talks to an employment lawyer, and finds out the exemption never actually applied.
Catching it before a former employee's lawyer does
This is a small, specific piece of ongoing bookkeeping, not a one-time form: a list of every salaried exempt employee, the state they actually work in, their current salary, and whichever threshold (federal or that state's) is higher. It needs to be checked whenever a threshold changes, whenever someone gets a raise or a pay cut, and whenever an employee's work location changes, none of which happen on a predictable calendar. That's exactly the kind of thing an agent can watch continuously against your payroll data and flag the employees who are close to or under the applicable line, with a short summary of why. It doesn't reclassify anyone or change a paycheck on its own. A person, usually you or whoever runs HR, reviews the flag and decides whether to raise the salary, move the role to hourly, or confirm the exemption still holds. Read more about how we build workflows like this around the payroll and HR tools you already use, or check the FAQ for how the human-approval step works. A wage-and-hour question with real money attached is worth a conversation with an employment attorney or your payroll provider before you act on it.
Sources: U.S. Department of Labor, Wage and Hour Division, "Earnings Thresholds for the Executive, Administrative, and Professional Exemption", Homebase, "Federal Overtime Salary Threshold: 2026 Rules Explained".