FLSA Exemptions Salary Threshold: What LLCs Must Know

FLSA exemptions salary threshold rules determine which employees your LLC can classify as exempt from overtime pay. Following a landmark federal court judgment, the Department of Labor is reverting to pre-2024 regulatory text, effectively rolling back the salary threshold that briefly rose to $58,656 annually in 2024. This ruling creates immediate compliance obligations for every LLC with salaried staff.

Overview of FLSA Exemptions and Recent Federal Court Changes

The Fair Labor Standards Act (FLSA) has governed overtime exemptions since 1938, but the last two years delivered whiplash-inducing regulatory changes that left LLC owners scrambling to keep up. Under the DOL wage and hour updates finalized in 2024, the salary threshold for white-collar exemptions was scheduled to rise in two phases: first to $43,888 per year ($844 per week) effective July 1, 2024, and then to $58,656 per year ($1,128 per week) effective January 1, 2025.

A federal court subsequently vacated the 2024 DOL rule in its entirety, triggering a reversion to the pre-2024 regulatory text. That means the controlling salary threshold for most white-collar exemptions has snapped back to $35,568 per year ($684 per week), the level established by the 2019 DOL rulemaking. For LLCs that already raised salaries to meet the higher thresholds, the reversal creates both cost recalibration opportunities and misclassification risk reassessments.

Because federal court judgments on wage law can themselves be appealed, the compliance landscape remains fluid. LLC owners and their payroll administrators must understand exactly which threshold applies today, which categories of workers are affected, and how to document exemption decisions in a litigation-ready way.

The Five Main Employee Exemptions Explained

The FLSA establishes several categories of employees who may be exempt from overtime requirements. Each exemption has its own salary basis test, salary level test, and duties test. Satisfying all three components is mandatory — meeting only the salary threshold is never sufficient on its own.

What are the 5 FLSA exemptions for employees?

The five primary FLSA exemptions covering executive, administrative, professional, outside sales, and computer employees are commonly called the “white-collar” exemptions. Here is what distinguishes each:

• Executive exemption: Applies to employees whose primary duty is managing the enterprise or a recognized department, who regularly direct two or more full-time employees, and who have authority over hiring, firing, or promotions.
• Administrative exemption: Covers employees whose primary duty is office or non-manual work directly related to management or general business operations, and who exercise discretion and independent judgment on significant matters.
• Professional exemption (learned or creative): Applies to employees whose primary duty requires advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction, or employees in a recognized creative or artistic field.
• Outside sales exemption: Covers employees whose primary duty is making sales or obtaining orders away from the employer’s place of business. Notably, outside sales employees have no minimum salary requirement under current FLSA rules.
• Computer employee exemption: Applies to highly skilled computer professionals engaged in systems analysis, programming, or similar work. This exemption carries a unique dual-test structure: the employee must earn either a salary of at least $684 per week or an hourly rate of at least $27.63 per hour.

New Salary Threshold Requirements for Each Exemption Category

Following the federal court judgment vacating the 2024 salary threshold changes, the operative salary levels have reverted. The table below summarizes exactly where each exemption category stands as of 2026, compared to the vacated 2024 DOL rule.

FLSA Exemption Salary Thresholds: Before vs. After Federal Court Judgment

Exemption Type	Before (Vacated 2024 DOL Rule)	After Federal Court Judgment (Current)	Effective Date of Reversion
Executive	$58,656/year ($1,128/week)	$35,568/year ($684/week)	Post-court vacatur (2024–2025)
Administrative	$58,656/year ($1,128/week)	$35,568/year ($684/week)	Post-court vacatur (2024–2025)
Professional (Learned/Creative)	$58,656/year ($1,128/week)	$35,568/year ($684/week)	Post-court vacatur (2024–2025)
Outside Sales	No salary minimum required	No salary minimum required	N/A — unchanged
Computer Employee	$684/week or $27.63/hour	$684/week or $27.63/hour	N/A — unchanged by vacatur
Highly Compensated Employee (HCE)	$151,164/year	$107,432/year	Post-court vacatur (2024–2025)

The practical consequence for most LLCs: salaried exempt employees can now legally be classified as exempt at $684 per week ($35,568 annually) rather than the $1,128 per week the vacated rule would have required. This does not mean you must reduce salaries you already raised — but it does mean new hires and reclassification decisions can use the lower threshold while litigation and potential new rulemaking play out.

How These Changes Impact LLC Payroll and Compliance

How do salary thresholds affect LLC employment costs?

For an LLC with even five salaried exempt employees, the difference between a $35,568 threshold and a $58,656 threshold represents a potential payroll floor difference of $23,088 per employee per year. Multiply that across a team of ten exempt employees and you are looking at over $230,000 in annual salary floor variance — a meaningful figure for a startup or small LLC budgeting its runway.

LLC payroll compliance requirements extend beyond the salary number itself. Misclassification carries penalties that can include back overtime wages (typically two years of unpaid overtime, or three years for willful violations), liquidated damages equal to the back pay amount, and attorney’s fees. The DOL Wage and Hour Division actively investigates misclassification complaints, and plaintiff-side employment attorneys frequently file collective actions under FLSA. Getting the exemption analysis right is not optional.

What is the new minimum salary for exempt employees?

Following the federal court’s vacatur of the 2024 DOL rule, the current minimum salary for most executive, administrative, and professional exemptions is $684 per week, or $35,568 annually. This is the 2019-era threshold that was never successfully superseded by the 2024 rulemaking. However, LLC owners should note that some states — including California, New York, Washington, and Colorado — maintain their own, higher overtime exemption salary thresholds. California’s threshold, for example, is tied to two times the state minimum wage, which in 2026 exceeds $66,560 per year for employers in many wage order categories. Always apply the higher of the federal or state threshold.

How do federal court judgments impact overtime pay requirements?

Federal court judgments on wage law create immediate regulatory reversions when they vacate DOL rules. When a rule is vacated (as opposed to merely enjoined), the DOL must revert to the prior regulatory text rather than simply pausing enforcement. This means the $35,568 threshold is not a temporary reprieve — it is the legally operative standard until the DOL successfully issues a new rule that survives judicial review. For LLC payroll budgeting, this matters because forward projections should use $35,568 as the planning baseline, not $58,656, unless a new final rule is issued and survives challenge.

Calculating Your LLC’s Exemption Status Under New Rules

Applying the correct FLSA exemptions salary threshold to your LLC’s workforce requires a three-step analysis for every salaried employee you intend to classify as exempt.

• Step 1 — Salary basis test: Does the employee receive a predetermined fixed salary that is not subject to reduction based on the quality or quantity of work? Docking pay for partial-day absences (except under specific circumstances) can destroy the salary basis and eliminate exemption eligibility.
• Step 2 — Salary level test: Does the employee earn at least $684 per week ($35,568 annually) under the current reverted federal rule, or the applicable higher state threshold?
• Step 3 — Duties test: Does the employee’s primary duty match one of the five exemption categories? Remember that job titles are irrelevant — the actual day-to-day work controls.

For LLCs using payroll cost calculators, resetting the salary floor assumption from $58,656 to $35,568 will materially change your break-even analysis on exempt versus non-exempt classifications. An employee earning $40,000 who was non-exempt under the vacated rule (because $40,000 fell below $58,656) may now be legitimately classifiable as exempt — eliminating overtime liability on that position entirely, provided the duties test is satisfied.

Common Misconceptions About Executive, Administrative, and Professional Exemptions

Are computer employees treated differently under FLSA exemptions?

Yes — the computer employee exemption salary structure is unique among the five white-collar exemptions. While executive administrative professional exemptions require a salary of at least $684 per week, the computer employee exemption offers an alternative: the employee may instead be paid on an hourly basis at a rate not less than $27.63 per hour. This dual-path structure means highly paid hourly contractors or consultants in IT roles may qualify for exemption without being placed on salary. The duties requirements are also tightly defined: the employee must be engaged in computer systems analysis, programming, software engineering, or similar highly technical work requiring the same level of skill.

Does meeting the salary threshold automatically create an exemption?

No — this is the most dangerous misconception LLC owners hold. Paying an employee $35,568 or more per year does not exempt them from overtime. The duties test is an independent, mandatory requirement. A customer service supervisor earning $45,000 who answers phones and escalates tickets but does not manage staff, exercise independent judgment on significant matters, or perform work requiring advanced specialized knowledge is not exempt — regardless of salary level.

Can an LLC reduce salaries now that the higher threshold was vacated?

Legally, there is no federal FLSA prohibition on reducing a salary, provided the employee remains above the applicable threshold and proper notice is given. However, employment contracts, state wage laws, and employee relations considerations all constrain this option in practice. Additionally, reducing a recently-raised salary to exploit the court’s reversal exposes LLCs to state-law wage claims and reputational risks. The better strategic move is to use the reverted threshold for new hire offers and reclassification decisions, while leaving existing salaries in place.

How do outside sales exemption rules differ from other categories?

The outside sales exemption is the outlier among the five categories: it has no salary level requirement whatsoever. An outside sales representative can be paid entirely on commission, earn below the minimum wage in a slow month, and still be lawfully exempt — as long as their primary duty is making sales or obtaining orders away from the employer’s place of business. LLCs with field sales teams frequently misapply this exemption to inside sales staff who work from the office, which creates significant overtime liability. The employee must customarily and regularly work away from the employer’s premises.

Understanding outside sales exemption rules is particularly important for LLC cost calculators because commission-heavy sales roles are often the most expensive to reclassify retroactively. A single misclassified inside salesperson working 50 hours per week for two years can generate tens of thousands of dollars in back-wage liability.

As regulatory action continues to evolve — with potential new DOL rulemaking anticipated and ongoing appellate proceedings — LLC owners must build compliance checkpoints into their payroll review calendars. The safest posture is to document the exemption analysis for every salaried employee, revisit classifications annually, and use a payroll cost calculator that reflects the current operative threshold, not the vacated one.

Ready to recalculate your LLC’s payroll costs under the current FLSA exemption rules? Use the LLC Cost Calculator at llccostcalc.com to model your exempt employee classifications with the reverted $35,568 salary threshold, compare overtime exposure across your workforce, and build a startup payroll budget that reflects the regulatory reality — not a vacated rule that no longer applies. Our calculator is updated to reflect current DOL wage and hour guidance so you can plan with confidence while the regulatory landscape continues to shift.

Related: FLSA Exemptions Salary Threshold: What LLC Owners Must Know

Related: FLSA Exemptions & Employment Classification Guide 2026