FLSA Compliance Guide 2026: Wage and Hour Rules for HR

FLSA compliance in 2026: the exempt salary threshold is $684 a week, back-pay recoveries top $259 million and audits matter. Read the guide.

By Cosby Khosa · Published 24 October 2026

Key takeaways

The Department of Labor recovered over $259 million in back wages for nearly 177,000 workers in fiscal 2025, the most since 2019.
The federal exempt salary threshold is $684 a week ($35,568 a year), and the highly compensated threshold is $107,432.
A production bonus must be included in the regular rate when calculating overtime.
Run an annual audit, and remember that many states set stricter rules.

FLSA compliance matters more in 2026 because enforcement is rising and the rules have moved back and forth. A guide by Carol Warner for HR Morning, published on 6 October 2026 and updated on 19 October, pulls the key points together. It was read in full for this summary.

The numbers set the tone. The Department of Labor recovered over $259 million in back wages for nearly 177,000 workers in fiscal 2025, the most since 2019. The federal exempt salary threshold is back at $684 a week, which is $35,568 a year, after a court struck down the 2024 increase. The highly compensated employee threshold is $107,432.

This article explains those rules, the overtime maths, the court cases and a practical audit checklist. It is general information and not legal advice, since rules vary by state and situation, so employers should speak to a qualified employment lawyer. The FLSA is the US Fair Labor Standards Act, and the guide covers US law.

Why FLSA compliance is under the spotlight in 2026

The guide opens with enforcement numbers. The Department of Labor recovered over $259 million in back wages for nearly 177,000 workers in fiscal 2025. That is the highest total since 2019.

Those figures show that wage and hour enforcement is active. Workers who have been underpaid, and who may not even know it, are being identified and repaid. For employers, the message is that errors are costly and likely to be found.

The guide also notes that the Department relaunched its PAID self-audit programme. PAID lets employers who find their own pay errors report them and make repayments under Department supervision, which can reduce the risk of further claims. It is a sign that the agency wants employers to fix problems early.

Another development is the proposal of a new test for deciding whether a worker is an employee or an independent contractor, made in February 2026. Classification is a major source of disputes. A new test could change who is covered by overtime and minimum wage rules.

In short, FLSA compliance is not a once-a-year task. It needs attention throughout the year.

The exempt salary threshold of $684 a week

One of the most important details in the guide is the salary threshold for exemption from overtime. Under the FLSA, most employees must receive overtime pay at one and a half times their regular rate for hours over 40 in a week. Some employees are exempt, including certain executive, administrative and professional roles, but only if they meet tests on duties and salary.

The guide says that the federal threshold is back at $684 a week, or $35,568 a year. The reason is a court decision that struck down the 2024 increase. The Department of Labor republished the 2019 figure in May 2026.

This is a good example of why you should check current rules. Some older guides quote a different figure, and one vendor blog states the threshold as $58,656. That conflicts with the HR Morning figure, so it should be treated as outdated.

Remember that states may set higher thresholds. An employer in a state with a higher salary test must meet the state rule. A simple way to stay safe is to use the higher of the federal and state figures for each employee.

Also remember that salary is only one part of the test. The employee's duties must also fit the exemption.

The highly compensated threshold of $107,432

The guide also states the threshold for highly compensated employees, which is $107,432. This is a special, simpler test for workers who earn a high annual salary.

If an employee earns at or above this amount, and customarily performs at least one exempt duty of an executive, administrative or professional employee, they may be exempt from overtime. It is a shortcut that reduces the duties analysis for high earners.

But it is not a free pass. The employee must still do work that fits at least one exempt duty. And the pay must meet the threshold in the form the rule requires, usually including a minimum salary component.

Employers should therefore check each highly paid employee and not assume. A senior person in a role that is mostly manual or routine may not qualify.

Also check state rules. Some states have their own versions or higher thresholds.

Because the figures have changed in recent years, build a habit of checking the Department of Labor's website for the latest numbers. Set a calendar reminder each quarter. A small effort can prevent a large liability.

Overtime maths: why a production bonus changes the regular rate

The guide includes a worked example of overtime maths, and the main lesson is that a production bonus must be included in the regular rate. This is a common source of errors.

Here is a simple example of the principle, using our own numbers and not the guide's. Suppose a worker earns $20 an hour, works 45 hours in a week and earns a $100 production bonus. The straight-time pay is 45 times $20, which is $900. Add the bonus, and total pay before overtime premium is $1,000.

The regular rate is that total divided by the hours worked: $1,000 divided by 45, or about $22.22. The worker has already been paid straight time for all 45 hours, so the extra owed for the five overtime hours is half of the regular rate, or about $11.11 per hour. That adds about $55.56, for a total of about $1,055.56.

If the employer had ignored the bonus, it would have calculated the premium on $20, and underpaid the worker. Across many workers and many weeks, the error grows.

The principle is that most non-discretionary bonuses count in the regular rate. Check each type of pay, such as shift differentials and commissions, and ask whether it belongs. When in doubt, ask an employment lawyer or the Department of Labor.

What the court cases teach about FLSA compliance

The guide reviews several cases that show what can go wrong. They are useful because they put numbers on risk.

$22.25 million verdict: unpaid time spent changing and showering. Where workers must change into protective clothing or wash because of the nature of the work, that time can count as working time. If it is not paid, the employer may face claims for every worker over many years.
$8.875 million settlement: supermarket managers who were classed as exempt. The managers spent much of their time on tasks like stocking and cashiering, so their duties did not match the exemption, even though their title said manager. A job title alone does not make someone exempt.
$732,976 recovered: a restaurant that paid flat monthly salaries. Paying a salary does not automatically remove overtime duties. If the person is not exempt, they must be paid overtime for hours over 40.

The common thread is that employers got the basics wrong in ways that affected many workers. A small error repeated across a workforce becomes a large bill, which is why FLSA compliance is worth the effort.

Misclassification: managers, salaries and contractors

Misclassification is one of the biggest risks. It happens when an employer treats a worker as exempt, or as an independent contractor, when the law says they should be covered.

For exemption, the key is that both the duties and the salary tests must be met. A manager who mostly does non-managerial work may not qualify. A salaried worker who earns below the threshold does not qualify, whatever the duties.

For contractors, the key is the real relationship. The Department of Labor proposed a new employee-versus-contractor test in February 2026. Whatever the final test, factors such as control, opportunity for profit or loss, and permanence of the relationship usually matter. Calling someone a contractor in a contract does not settle the question.

To reduce risk, review job roles regularly. Compare real duties, not just titles, to the exemption tests. Review contractors, and ask whether they work like employees. Document your reasoning.

If you find errors, consider fixing them promptly. The PAID programme exists to help employers do this. An early fix is usually cheaper than a dispute.

An annual FLSA compliance audit checklist

The guide ends with an annual audit checklist for FLSA compliance. Here is a practical version based on its themes, adapted into plain steps.

Review thresholds. Check the federal salary threshold of $684 a week and the highly compensated figure of $107,432. Check your state's thresholds.
Review classifications. List all exempt roles. Compare actual duties with the tests. Check that salary meets the threshold.
Review the regular rate. Check that bonuses, differentials and other non-discretionary pay are included in overtime calculations.
Review time records. Check that all working time is recorded, including pre-shift and post-shift tasks such as changing and cleaning where required.
Review contractors. Check whether each contractor is genuinely independent.
Review state law. Many states have stricter rules for overtime, breaks, minimum wage and pay timing.
Document everything. Keep records of the audit and of any fixes.

In short: check thresholds and state rules, test every exempt role against duties and salary, audit the regular rate, and review time records and contractors. Doing this once a year can prevent many FLSA compliance problems.

Who should own FLSA compliance inside an organisation

Compliance fails most often when nobody owns it. The guide's emphasis on an annual audit implies that someone must lead it, and it helps to be clear about roles.

HR usually coordinates. It tracks changes to the law, maintains job classifications and organises the audit. But HR cannot do everything alone.
Payroll holds the numbers. It calculates overtime, applies the regular rate and issues pay. Payroll staff should be trained to spot issues such as bonuses that affect the regular rate, and they should have a route to raise concerns.
Managers shape daily practice. They approve timesheets, assign work and sometimes ask people to work off the clock without realising that it creates liability. Train managers in the basics, and make it clear that all working time must be recorded and paid.
Finance and legal advise. Finance understands the cost of risk. Legal, whether in-house or external, interprets the rules and handles disputes.
Senior leaders set the tone. If they treat compliance as a priority, others will too.

Write down who is responsible for each step, and review the list each year. Clear ownership turns FLSA compliance from a worry into a routine, and it makes audits faster and more effective.

How to use this FLSA compliance guide wisely

This is a guide for a US audience, so South African readers should not apply it to local law. South Africa has its own rules, including the Basic Conditions of Employment Act. If you manage staff in South Africa, use local sources and advice. If you work for a US company or manage US staff, the guide is directly relevant.

Remember that any guide to FLSA compliance is general information. The right answer for a specific employer depends on facts, such as industry, location and job duties, and on state and local law. An employment lawyer can advise on your situation.

Check the date of any compliance material. The guide was updated on 19 October 2026, but rules can change. Verify key figures with the Department of Labor.

Finally, treat FLSA compliance as a habit. Build routines, such as quarterly checks and annual audits, and train managers to spot issues. A culture of getting pay right protects both employees and the business.

Quick Revision: FLSA Compliance Flashcards

What is the federal exempt salary threshold in the HR Morning guide?

$684 a week, or $35,568 a year

What must be included in the regular rate when calculating overtime?

Non-discretionary pay such as a production bonus

What did the Department of Labor recover in back wages in fiscal 2025?

Over $259 million for nearly 177,000 workers

Does a manager title make someone exempt from overtime?

No, both the duties test and the salary test must be met

Final thoughts

FLSA compliance in 2026 demands attention. The Department of Labor recovered over $259 million in back wages for nearly 177,000 workers in fiscal 2025, the most since 2019. The federal exempt salary threshold is $684 a week, or $35,568 a year, and the highly compensated threshold is $107,432. A new contractor test was proposed in February 2026, and the PAID self-audit programme has returned.

Overtime maths, such as including production bonuses in the regular rate, and cases like the $22.25 million verdict, show how errors multiply. An annual audit and a check of state law are the best defences.

This article is general information, not legal advice. Check current figures with the Department of Labor and speak to an employment lawyer about your own situation.

Sources and further reading

HR Morning, FLSA Compliance Guide 2026: Wage and Hour Rules for HR