DOL Reverses Biden-Era Overtime Rule

HR / Workplace, News

By: Kim Adamson

 

The Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL) has formally rescinded the 2024 overtime rule issued during the Biden Administration, which would have significantly expanded overtime eligibility by increasing the salary threshold for employees classified as exempt under the executive, administrative, and professional (EAP) by establishing the salary level needed to qualify for the Fair Labor Standards Act (FLSA) “white collar” overtime exemptions.

The 2024 rule would have raised the earnings threshold for overtime to $844 per week ($43,888 annually) in July 2024. Prior to being struck down by federal courts, it was scheduled to increase again to $1,128 per week ($58,656 annually) in January 2025, and included automatic increases every three years thereafter. The threshold for highly compensated employees would have been $132,964 annually. However, in late 2024, two Texas district courts vacated the 2024 final rule. The DOL filed an appeal with the 5th U.S. Circuit Court of Appeals, which it dropped in early May 2026.  The Court of Appeals then dismissed the cases, and the orders remain final judgments. The DOL’s action took effect May 15, 2026, when a technical amendment was published to remove the 2024 rule from the Code of Federal Regulations.

The DOL’s technical amendment does not alter the WHD’s enforcement posture, as the WHD has applied the 2019 salary thresholds contained in the DOL’s latest technical amendment since the 2024 rule was vacated.

With the rescission and technical amendment, the federal salary thresholds for EAP exemptions return to the levels established under the 2019 rule:  $684 per week ($35,568 annually) and $107,432 annually for highly compensated employees.  

Special Considerations for Colorado Employers

Colorado law remains more protective than federal law and is unaffected by the federal rescission. The Colorado Department of Labor and Employment (CDLE) issues the Colorado Overtime and Minimum Pay Standards (COMPS) Order annually on January 1st of each year. The COMPS Order provides broader protections than the federal FLSA, ensuring employers in Colorado can continue to rely on strong legal safeguards.

  • Broader Coverage: The COMPS Order covers most private-sector employees in Colorado, including those who might not meet the federal FLSA coverage thresholds for certain smaller employers, clarifying how federal and state laws interact and which takes precedence in different scenarios.
  • Higher Salary Threshold for Exempt Employees: As of 2026, exempt employees in Colorado generally must earn about $57,784 annually (calculated at $1,111.22 per week) to qualify for the overtime exemption, which is well above the federal level. Employers should review their current salary levels to determine if they meet this higher threshold and avoid non-compliance.
  • Annual Adjustments: Salary thresholds and wage requirements are updated annually pursuant to Colorado’s PAY CALC Order. Employers must review compensation annually to remain compliant.
  • Limited Use of Bonuses Toward Salary Threshold: Only up to 10% of the exempt salary threshold can be satisfied with nondiscretionary bonuses, commissions, or incentives. 
  • Most Protective Rule Applies: When the federal FLSA and state laws differ, employers must follow the rule most favorable to employees, meaning Colorado standards will often control.
  • Strict Recordkeeping and Posting Requirements: Employers must maintain detailed wage records (including vacation and sick leave) and post or distribute the COMPS Order to employees, including remote workers.
  • Daily Overtime Requirement for Non-Exempt Hourly Employees: Colorado requires overtime pay after 40 hours worked in a workweek, but also after 12 hours in a workday or consecutive 12‑hour shifts, regardless of whether the employee worked 40 hours in a workweek.  The federal FLSA does not impose a daily overtime requirement. 
  • Comp Time Prohibited for Non-Exempt Hourly Employees: Colorado explicitly prohibits private-sector employers from substituting compensatory time off for overtime pay. 

The DOL’s rescission largely formalizes the status quo following court rulings. Many employers were already operating under the 2019 rule thresholds after the courts vacated the 2024 rule in late 2024. This is an opportunity for employers to reassess and confidently adjust their compliance strategies to ensure they remain aligned with current regulations. 

  • Audit employee classifications to make sure they still meet both the salary threshold and duties tests to qualify as exempt (salary alone is not sufficient). Employers should establish a clear process for reviewing classifications regularly to prevent violations and potential penalties. 
  • Confirm compliance with state-specific rules and requirements, which may impose higher salary thresholds or broader overtime obligations, especially in Colorado, where requirements exceed federal law.
  • Review pay and compensation structures and scheduling practices to ensure compliance with daily overtime and higher salary thresholds.
  • Employers who adjusted salaries, reclassified employees, or workforce strategies in anticipation of the higher thresholds should consider whether to maintain or revise those changes.  Any adjustments should be carefully considered in light of employee relations, state law requirements, and contractual obligations.   
  • Employers should monitor developments since it is possible the DOL could revisit overtime regulations in the future.  

 

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