FLSA Exemptions Salary Threshold: What LLC Owners Must Know

FLSA exemptions salary threshold rules determine which employees LLC owners must pay overtime — and they just changed significantly. The 2024 DOL rule raised the standard salary floor to $43,888 annually effective July 1, 2024, covering executive, administrative, and professional employees, with a further increase planned for January 1, 2025. A federal court has since vacated that rule entirely.

Overview of FLSA Exemptions and Recent Federal Court Judgments

The Fair Labor Standards Act (FLSA) establishes federal wage and hour laws that govern how American employers — including LLC owners — must compensate their workforce. At the center of these rules are the so-called “white-collar” exemptions, which allow employers to classify certain salaried employees as exempt from overtime pay requirements. The key question has always been: at what salary level does that exemption apply?

In April 2024, the Department of Labor (DOL) issued a sweeping final rule that significantly raised the salary threshold for FLSA exemptions. The rule set a new salary floor of $43,888 per year ($844 per week) effective July 1, 2024, replacing the previous threshold of $35,568 per year ($684 per week) that had been in place since January 1, 2020. The rule also called for an additional increase to approximately $58,656 annually ($1,128 per week) on January 1, 2025, along with automatic triennial updates tied to wage data percentiles.

However, in late 2024, a federal district court in Texas vacated the DOL’s 2024 rule in its entirety, ruling that the Department had exceeded its statutory authority by setting thresholds so high they effectively displaced the duties test — the qualitative evaluation of whether an employee’s job responsibilities actually meet the executive, administrative, or professional standard. The court’s decision applied nationwide, and the DOL has since announced it is reverting to the pre-2024 regulations, restoring the $35,568 annual / $684 weekly threshold as the operative standard.

This is a landmark shift that every LLC owner with salaried employees needs to understand immediately.

What is the new FLSA salary threshold for exempt employees in 2024?

Following the federal court judgment vacating the 2024 DOL rule, the operative FLSA salary threshold has reverted to $35,568 per year ($684 per week) — the standard established in 2020. The July 1, 2024 increase to $43,888 and the planned January 1, 2025 increase to $58,656 are both nullified. For LLC employers, this means employees earning between $35,568 and $43,887 annually who were reclassified as non-exempt under the 2024 rule may now qualify for exemption again — provided they also satisfy the applicable duties test.

FLSA Exemptions Salary Threshold Comparison: Before and After the 2024 Rule

The following table illustrates the salary threshold changes at each stage, helping LLC owners quickly identify where their payroll currently stands relative to federal wage and hour laws.

Effective Date / Status	Annual Salary Threshold	Weekly Salary Threshold
Before July 1, 2024 (Jan 1, 2020 rule — now restored)	$35,568	$684
July 1, 2024 (2024 DOL Rule — now vacated)	$43,888	$844
January 1, 2025 (Planned increase — now vacated)	$58,656	$1,128
Current Standard (2026) — Post-court judgment	$35,568	$684

Impact on LLC Payroll Costs and Compliance

For LLC owners, the practical implications of this reversion are substantial. When the 2024 rule took effect in July of that year, businesses scrambled to respond. Many small LLCs faced a difficult choice: raise salaries above the new $43,888 threshold to maintain exempt status, reclassify employees as hourly non-exempt workers and begin tracking their hours, or restructure compensation entirely. Each path carried real costs — in time, legal fees, HR software updates, and direct payroll expenditures.

How do FLSA exemptions affect LLC payroll costs?

FLSA exemptions directly reduce payroll compliance costs for LLC employers by eliminating the need to track hours and pay overtime (time-and-a-half) for qualifying salaried employees. When thresholds rise, more employees fall into non-exempt territory, increasing overtime exposure, timekeeping obligations, and administrative overhead. For a small LLC with five salaried employees earning between $36,000 and $43,000 annually, the 2024 rule potentially added thousands of dollars in overtime liability and compliance costs. With the threshold reverted to $35,568, those employees may once again qualify as exempt — eliminating that overtime exposure entirely, assuming they meet the relevant duties tests.

Beyond direct overtime costs, LLC payroll compliance involves proper recordkeeping, potential audits, and the risk of back-pay claims. The DOL’s Wage and Hour Division actively investigates misclassification complaints, and penalties can include back wages, liquidated damages equal to the back wages owed, and civil penalties up to $2,374 per willful violation as of 2024 enforcement standards. For an LLC, these costs can be existential.

The reversion to pre-2024 thresholds reduces complexity for most small LLCs — but businesses that restructured compensation around the higher 2024 thresholds now face a new round of recalculation. Raising salaries above $43,888 to preserve exempt status was a legitimate response to the 2024 rule. Those increases don’t automatically need to be reversed, but businesses should reassess whether maintaining elevated salaries makes operational and financial sense now that the legal requirement no longer exists.

Breakdown of Each Exemption Category and New Requirements

The FLSA’s white-collar exemption framework covers five primary categories. Each carries its own duties test requirements in addition to the salary threshold. Understanding where each applies is critical for LLC payroll compliance.

What are the five main FLSA employee exemption categories?

• Executive Exemption: Applies to employees whose primary duty is managing the enterprise or a recognized department, who customarily direct the work of two or more other employees, and who have authority to hire or fire (or whose recommendations carry significant weight). Must earn at least $684/week ($35,568/year).
• 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. Same salary threshold applies.
• Professional Exemption: Applies to learned professionals (work requiring advanced knowledge in a field of science or learning) or creative professionals (work requiring invention, imagination, or talent). Same salary floor of $684/week.
• Outside Sales Exemption: Unique among the five — the outside sales exemption rules carry no salary threshold requirement. Employees must make sales or obtain orders away from the employer’s place of business as their primary duty. This exemption is unaffected by the threshold reversion.
• Computer Employee Exemption: Applies to systems analysts, programmers, software engineers, and similarly skilled workers in computer occupations. The computer employee exemption can be satisfied by either the standard salary threshold ($684/week) or an hourly rate of at least $27.63 per hour. The hourly alternative is unchanged by the 2024 rule vacatur.

Do computer employees qualify for FLSA exemptions?

Yes — computer employees qualify for a specific FLSA exemption under Section 13(a)(17) of the Act. To qualify, the employee must be employed in a computer-related occupation (systems analyst, programmer, software engineer, or similar role), earn at least $684 per week on a salary basis or at least $27.63 per hour, and their primary duties must involve the application of systems analysis techniques, design or development of computer systems or programs, or similar high-level functions. Routine computer operation or data entry work does not qualify. For LLC owners in the tech sector or employing IT staff, the dual salary/hourly qualification path offers meaningful flexibility.

How llccostcalc.com Helps You Calculate Adjusted Payroll Expenses

Navigating FLSA exemption determinations manually is time-consuming and error-prone — especially when thresholds shift due to regulatory changes or court judgments. That’s precisely the gap that llccostcalc.com is built to fill.

Our LLC cost calculator incorporates current federal wage and hour law standards, including the restored $35,568 salary threshold, to help you quickly model your payroll classification scenarios. Whether you’re forming a new LLC and projecting initial payroll compliance costs, or you’re an established business recalibrating after the 2024 rule disruption, the tool provides a clear, accurate baseline.

Here’s how LLC owners are using llccostcalc.com in the current regulatory environment:

• Reclassification cost modeling: Input your current salaried employee roster and salary levels to see which workers fall above or below the $35,568 threshold and what exemption status changes mean for your overtime exposure.
• Formation cost planning: New LLCs can estimate state filing fees, registered agent costs, operating agreement preparation expenses, and initial payroll compliance setup costs — all in one place.
• Scenario comparison: Compare the cost impact of treating a borderline employee as exempt versus non-exempt, including projected overtime liability under different work-hour assumptions.
• State-level overlays: Several states — including California, New York, and Colorado — maintain their own salary thresholds that exceed the federal floor. Our tool flags state-specific requirements that may still require higher salary floors even after the federal reversion.

Action Steps for LLC Owners to Ensure Compliance

The federal court’s vacatur of the 2024 DOL rule creates both an opportunity and an obligation for LLC owners. Here is a practical compliance roadmap for 2026:

• Audit current employee classifications immediately. Identify every salaried employee classified as non-exempt specifically because of the 2024 threshold increase. These employees may now qualify for exempt status under the restored $35,568 floor — but you must also confirm they satisfy the applicable duties test.
• Review compensation changes made in 2024. If you raised salaries above $43,888 to preserve exempt status, evaluate whether those increases should be maintained, modified, or restructured. Document your decision rationale carefully.
• Check your state’s overtime rules. Federal reversion does not override state law. California’s exempt salary threshold is currently $66,560 annually for employers with 26 or more employees. New York and Colorado maintain separate elevated thresholds. LLC compliance requires satisfying both federal and state requirements.
• Update your HR and payroll software. Any automated exemption determination logic that was calibrated to the 2024 thresholds ($43,888 or $58,656) must be updated to reflect the current $35,568 federal standard.
• Consult an employment attorney for borderline cases. Employees earning between $35,568 and $43,887 who were reclassified in mid-2024 represent your highest-risk group. Back-pay obligations, if any, will depend on the specific facts of their classification history.
• Document everything. The DOL’s Wage and Hour Division treats poor recordkeeping as an aggravating factor in investigations. Maintain clear records of classification decisions, salary levels, and duties assessments for all exempt employees.

What happens if an LLC misclassifies employees under FLSA exemptions?

Misclassifying a non-exempt employee as exempt under the FLSA exposes an LLC to significant legal and financial liability. The DOL can recover up to two years of unpaid overtime wages (three years for willful violations), plus an equal amount in liquidated damages — effectively doubling the back-pay obligation. Civil penalties of up to $2,374 per violation apply for willful or repeat offenders. In egregious cases, the DOL can refer matters for criminal prosecution. Private lawsuits by affected employees are also common, and plaintiffs in FLSA collective actions can recover attorney’s fees, further multiplying exposure. For a small LLC, a single misclassification finding involving multiple employees can be financially devastating.

Frequently Asked Questions About FLSA Exemptions and LLC Compliance

Does the federal court ruling mean all the 2024 DOL overtime changes are gone?

Yes — the federal district court’s ruling vacated the entire 2024 DOL final rule on a nationwide basis. This means both the July 1, 2024 increase to $43,888 and the January 1, 2025 scheduled increase to $58,656 are nullified. The operative federal FLSA salary threshold is now the $684 per week / $35,568 annually standard established by the 2019 final rule (effective January 1, 2020). The DOL has confirmed it is reverting to pre-2024 regulations.

Do I need to reverse salary increases I made to comply with the 2024 rule?

There is no legal requirement to reduce salaries that were voluntarily raised in response to the 2024 rule. However, from a business cost perspective, LLC owners should evaluate whether maintaining those higher salaries makes sense. Reducing compensation is legally permissible with proper notice, but carries employee relations risks. Many advisors recommend maintaining increases for high-performing employees while reassessing compensation for new hires using the restored federal threshold as a baseline.

Are highly compensated employees affected by the threshold reversion?

The FLSA also provides a separate highly compensated employee (HCE) exemption. Under the 2020 rule, the HCE total annual compensation threshold was $107,432. The 2024 DOL rule proposed raising that to $132,964 (July 2024) and then $151,164 (January 2025). Both HCE increases are also vacated by the court ruling. The operative HCE threshold reverts to $107,432 annually, with a minimum salary component of $684 per week. This affects LLC owners compensating high-earning managers or professionals who relied on the HCE path rather than the standard duties-based exemptions.

The FLSA exemption landscape is more navigable than it was 18 months ago — but it remains complex, especially when state-level rules, duties tests, and mid-year compensation changes are layered in. Getting your classifications right protects your LLC from costly enforcement actions and keeps your payroll budget predictable.

Ready to see exactly what your LLC’s payroll compliance costs look like under the current rules? Use the llccostcalc.com LLC Cost Calculator to model your employee classifications, project overtime exposure, and compare the financial impact of exempt versus non-exempt treatment — all updated to reflect the restored $35,568 federal salary threshold. Our tool takes the guesswork out of DOL exemption regulations so you can focus on building your business with confidence. Calculate your LLC payroll costs now →

Related: FLSA Exemptions Salary Threshold: What LLCs Must Know

Related: FLSA Exemptions & Employment Classification Guide 2026