The Federal Overtime Threshold Reverted to $35,568 — Here's Why That's Not the Overtime Risk That Should Worry Contractors

5 days ago

6 min read

Construction business owners who tried to plan around the Department of Labor's 2024 overtime rule got a lesson in how fast federal wage-and-hour law can change: a federal judge in the Eastern District of Texas vacated that rule nationwide on November 15, 2024, in State of Texas v. Department of Labor, before its second phase-in step ever took effect. The practical result for every construction employer in the country is that the federal overtime salary threshold reverted to the pre-2024 standard — $35,568 per year, or $684 per week — and it has stayed there since. For contractors who update payroll classifications once and assume they're done, this reversal is exactly the kind of change that can go unnoticed until a misclassified foreman generates a wage claim.

What Actually Happened to the 2024 Rule

The Department of Labor's 2024 final rule would have raised the federal salary threshold for the FLSA's executive, administrative, and professional (EAP) exemption in two steps: to $43,888 per year effective July 1, 2024, and then to $58,656 per year effective January 1, 2025, with automatic updates every three years after that. The first step took effect as scheduled. But on November 15, 2024, the U.S. District Court for the Eastern District of Texas struck down the entire rule nationwide, ruling that the Department of Labor had exceeded its authority by raising the salary threshold so far above historical levels that it effectively replaced the FLSA's job-duties test with a salary-only test. Because the ruling vacated the rule in full, both the July 2024 increase and the planned January 2025 increase were nullified, and the threshold reverted to the 2019 level of $35,568 per year ($684 per week) — the standard that had been in effect since January 2020.

The current federal EAP exemption salary threshold is $35,568 per year ($684 per week), reverted from the vacated 2024 rule and unchanged as of this writing.
Meeting the salary threshold is necessary but not sufficient for exemption — an employee also has to satisfy the relevant duties test (executive, administrative, or professional) to be properly classified as exempt from overtime.
The FLSA's companion "highly compensated employee" exemption threshold also reverted along with the rest of the vacated rule, back to its pre-2024 level, affecting a smaller slice of higher-paid supervisory and administrative staff.
Some states set their own, higher salary thresholds for overtime exemption that apply regardless of the federal standard — contractors operating in those states have to comply with whichever threshold, state or federal, is more protective of the employee.

Why Construction Businesses Feel This Differently Than Other Industries

Construction has one of the most litigated overtime exposure profiles of any industry, not because the law is unusually complicated for this sector, but because the workforce mix — working foremen, leadmen, and crew supervisors who spend real time doing manual labor alongside the crews they technically supervise — sits right at the line the duties test is designed to draw. A foreman who is paid a flat salary and given the title "supervisor" isn't automatically exempt from overtime; the FLSA's executive exemption requires that the employee's primary duty actually be management, that they regularly direct the work of at least two or more full-time employees, and that they have genuine authority (or meaningful input) into hiring and firing decisions. A "working foreman" who spends the bulk of each day operating equipment or performing the same manual tasks as the crew, with supervision as a secondary function, often fails the primary-duty test regardless of salary or title — and misclassifying that employee as exempt exposes the business to back overtime pay, often going back two years (three for willful violations) under the FLSA's statute of limitations.

The Regular Rate Trap for Piece-Rate and Bonus Pay

A separate and frequently overlooked overtime compliance issue has nothing to do with the exemption threshold at all: how the "regular rate" is calculated for non-exempt employees who receive more than just a straight hourly wage. Under the FLSA, non-discretionary bonuses, production incentives, and most piece-rate or per-job pay have to be folded into the regular rate used to calculate overtime, not paid on top of a separately-calculated hourly overtime rate. A contractor who pays a flat hourly rate for straight-time hours and a separate piece-rate bonus for completed units of work, without recalculating the regular rate to include that bonus before computing time-and-a-half, is underpaying overtime even if the base hourly rate itself is calculated correctly — a mistake that's common precisely because it feels like the bonus is "extra" rather than part of the wage base the law requires it to be included in.

Day Rates and the Construction-Specific Overtime Pitfall

Some construction employers pay skilled trades and supervisory staff a flat day rate — a set amount per day worked, regardless of hours — reasoning that the day rate already accounts for long hours on a job site. The FLSA doesn't recognize a day rate as automatically overtime-compliant: unless the employee independently satisfies a full exemption test, a day-rate employee working more than 40 hours in a workweek is still owed overtime, calculated by first converting the day rate into an equivalent regular hourly rate for that week (total weekly pay divided by total hours worked) and then paying an overtime premium on top of that. The U.S. Supreme Court's 2023 decision in Helix Energy Solutions Group v. Hewitt reinforced this point for a highly compensated day-rate worker, finding that a day rate, by itself, does not satisfy the FLSA's requirement that exempt employees be paid on a true salary basis — a precedent construction employers using day rates for supervisory staff should take seriously.

Prevailing Wage Work Adds a Separate Overtime Layer

Contractors who work both private and federally-funded, Davis-Bacon-covered public projects need to track overtime obligations under two overlapping but distinct frameworks: the FLSA's standard time-and-a-half-after-40-hours rule, and the separate requirements that can apply under the Contract Work Hours and Safety Standards Act (CWHSSA) on covered federal contracts, which also generally requires overtime after 40 hours in a week on covered work, with its own penalty structure for violations. A contractor whose payroll system only tracks FLSA compliance, without flagging which hours were worked on a CWHSSA-covered contract, can miss separate reporting and penalty exposure that doesn't show up under ordinary FLSA enforcement alone.

A Worked Example: The Foreman Who Wasn't Actually Exempt

Illustrative example, not an actual case: a mid-size excavation contractor classifies a crew leadman as an exempt salaried supervisor at $42,000 a year — comfortably above the $35,568 federal threshold — and has him working routine 50-hour weeks without overtime pay, reasoning that the salary classification covers it. In practice, the leadman spends the large majority of each day operating equipment alongside the crew, with supervisory duties limited to assigning daily tasks and relaying instructions from the project manager; he has no authority over hiring, firing, or discipline. When a former employee eventually files a wage complaint, an investigator reviewing the leadman's actual day-to-day duties finds that his primary duty is operating equipment, not management, and that he doesn't meet the executive exemption's duties test regardless of his salary. The contractor owes up to two years of unpaid overtime for every week the leadman worked over 40 hours, calculated against his true hourly-equivalent rate — a liability that salary classification alone never actually protected against.

What a Defensible Classification Review Actually Looks Like

A defensible overtime classification isn't a title on an org chart — it's a documented review of what an employee actually does day to day, matched against the specific duties test for whichever exemption category the business is claiming, repeated periodically as job duties shift (which happens often in construction as crews grow, projects change, and people get promoted into roles with blurrier boundaries). Contractors who keep written job descriptions current, track the actual percentage of time supervisory staff spend on manual versus managerial tasks, and re-run the classification analysis whenever a role changes meaningfully are in a far stronger position if a DOL audit or employee wage claim ever puts that classification under scrutiny.

How This Connects to Equipment Financing

A properly classified, correctly compensated workforce is part of the same cost structure that determines whether a contractor can afford to bring new equipment in-house versus continuing to rent, and unpaid-overtime liability discovered years after the fact can disrupt an equipment budget just as badly as an unexpected repair bill. BFC finances the excavators, loaders, and trucks construction businesses use to grow their crews and their equipment fleet together, with terms structured around how these businesses actually operate. Our piece on

the workers' comp premium audit and uninsured subcontractor exposure covers a related payroll-and-compliance risk worth reviewing alongside overtime classification. Our piece on BLS's job outlook for operating engineers covers the labor-market pressure that makes retaining correctly-paid supervisory staff even more important.

The Bottom Line

The federal overtime salary threshold sits back at $35,568 per year after a court vacated the Department of Labor's 2024 rule, but the threshold is only one piece of overtime compliance — the duties test for working foremen, the regular-rate calculation for bonus and piece-rate pay, and the Helix Energy precedent on day rates all create exposure that salary level alone doesn't resolve. Contractors who periodically re-examine how their supervisory and skilled-trade staff are actually classified, rather than assuming a title or a salary number settles the question, are the ones least likely to discover a multi-year overtime liability through a wage claim instead of their own payroll review.