DOL final rule changes for 2026 have left many small-business owners genuinely confused about what the law actually requires right now. The overtime salary threshold moved up, then a federal court struck it back down. The independent contractor rule changed. FLSA enforcement priorities shifted. This guide cuts through the noise: what the current rules actually say, what changed recently, and the practical steps every small business with hourly employees should take before the next pay period.

The overtime salary threshold — where things stand

Under the FLSA, employees must be paid overtime (time-and-a-half for hours over 40 in a workweek) unless they qualify for an exemption. The most commonly used exemption — the executive/administrative/professional (EAP) exemption — requires that the employee earn above a minimum weekly salary threshold. Below that threshold, the employee must be paid overtime regardless of their job title or duties.

Here’s the recent history:

Pre-2024 rule: The threshold was $684 per week ($35,568/year), unchanged since 2020.
April 2024 DOL rule: The DOL issued a rule that would raise the threshold in two steps — to $844/week (July 2024), then to $1,128/week (January 2025).
November 2024: A federal court in Texas struck down the rule entirely, reverting the threshold to $684/week.

As of early 2026, the threshold sits at approximately $684/week — but the legal and regulatory landscape around it continues to shift. Verify the current figure at dol.gov before making any classification decisions; do not rely on the number printed in an article from six months ago, including this one.

Independent contractor classification: the 2024 rule

In January 2024, the DOL reinstated a six-factor “economic reality” test for determining whether a worker is an employee or an independent contractor under the FLSA. This replaced a simpler two-factor test and makes it harder to classify workers as 1099 contractors.

The six factors

Opportunity for profit or loss. Can the worker meaningfully profit or lose based on their own business decisions?
Investment by the worker. Has the worker invested in tools, equipment, or helpers relative to the employer’s investment?
Permanency of the relationship. Is the relationship indefinite or project-based?
Degree of control. Does the employer control how the work is done, or just the result?
Whether the work is integral to the employer’s business. Is this work core to what the business does?
Skill and initiative. Does the worker bring specialized skill and use independent business judgment?

No single factor is dispositive. The DOL looks at the totality of the relationship. For small businesses that rely on gig workers, seasonal contractors, or part-time helpers, this is the rule most likely to create exposure in 2026. If your contractors work regular hours, use your equipment, and do your core business functions, the economic-reality test will likely find them to be employees.

FLSA recordkeeping: what you must keep and for how long

The FLSA imposes specific recordkeeping requirements on employers. These apply to every business with hourly (non-exempt) employees, regardless of size.

What you must keep for each non-exempt employee

Name, address, date of birth (if under 19), sex, and occupation.
Time and day the workweek begins.
Hours worked each day and total hours each workweek.
Total daily or weekly straight-time earnings.
Regular hourly pay rate for any week overtime is worked.
Total overtime compensation for the workweek.
Deductions from or additions to wages.
Total wages paid each pay period and date of payment.

How long to keep records

Payroll records, collective bargaining agreements, and sales and purchase records: at least 3 years.
Records used to compute wages (time cards, timesheets, work and time schedules, records of additions/deductions): at least 2 years.

Paper timesheets satisfy this requirement, but a digital time clock makes it far easier to produce records on demand. In a DOL audit, an employer who can export a clean, timestamped log with GPS coordinates and manager approvals is in a much better position than one who has to locate two years of forms in a filing cabinet.

See How to Write a Clocking In and Out Policy for a template that covers the policy side of FLSA recordkeeping.

Wage-and-hour enforcement: what the DOL is actually looking for

Wage-and-hour violations — unpaid overtime, minimum wage violations, off-the-clock work — are consistently among the highest-volume enforcement areas for the DOL’s Wage and Hour Division. The industries most frequently cited include restaurants, construction, home care, retail, and agriculture.

The most common violations the DOL finds in small businesses

Off-the-clock work.Requiring employees to prep, clean, or handle tasks before clocking in or after clocking out. If the work benefits the employer and the employer knows or should know it’s happening, it’s compensable.
Rounding abuses.Rounding clock-in and clock-out times is permitted only if the rounding policy is neutral over time — it can’t systematically benefit the employer.
Meal break deductions without actual breaks.Deducting 30 minutes for a meal break that employees aren’t fully relieved of duties is a wage violation in every circuit.
Misclassification of non-exempt employees as exempt.The title “manager” or “supervisor” alone does not create an exemption. Duties and salary threshold both must be met.

State laws often exceed federal minimums

The FLSA is the federal floor. Many states impose higher minimums, shorter overtime triggers, stricter meal and rest break requirements, or additional recordkeeping duties. California, New York, Washington, and Oregon are the most commonly cited examples, but the list is long and growing.

If you operate in more than one state — or if you have remote workers — you need to apply the law that is most protective of the employee in each state where they work.

How time tracking connects to DOL compliance

The practical reality is that most DOL compliance failures for small businesses don’t come from intentional wage theft — they come from a lack of systems. No accurate clock-in record means no way to prove overtime was paid correctly. No break log means no defense against a missed-break claim.

A GPS time clock with automated overtime alerts and a compliance rules engine doesn’t replace an employment attorney, but it creates the audit trail that an attorney can actually work with. Key features that map to FLSA requirements:

Timestamped punch records with GPS. Satisfies the FLSA requirement to record hours worked each day and proves the punch happened on-site at the right time.
Automatic overtime alerts. Notifies managers before an employee hits 40 hours so overtime is approved, not discovered.
Break compliance rules.Configure mandatory meal periods and rest breaks. Violations route to the exception inbox automatically so they’re reviewed before payroll runs.
Locked pay periods and audit logs. Once a pay period is locked, changes require an explicit manager action with a logged reason — the kind of audit trail DOL investigators look for.

See How to Export Time Tracking Hours to ADP, Gusto, and QuickBooks for the payroll side of the compliance chain.

When to call an employment attorney

Specific circumstances where DIY research isn’t enough:

You’re about to reclassify a full-time employee as a contractor or change an employee’s exemption status.
You received a DOL investigation notice or an employee filed a wage complaint.
You operate in California, New York, or another state with complex break, overtime, or predictive scheduling requirements.
You have workers in multiple states and aren’t sure which law applies.
You’re implementing a new timekeeping or rounding policy.

The FLSA’s two-year lookback window means liability can accumulate quietly. An employment attorney consultation is far cheaper than two years of back wages plus liquidated damages.

FAQ

What is the current FLSA overtime salary threshold?

As of early 2026, the threshold is approximately $684/week ($35,568/year) following the court rejection of the 2024 DOL rule. Verify the current figure at dol.gov before making any classification decisions — this number has changed multiple times in recent years.

Does the overtime threshold apply to salaried employees?

Yes. Salary alone doesn’t create an overtime exemption. The employee must both earn above the salary threshold AND primarily perform executive, administrative, or professional duties. Below the threshold, overtime applies regardless of duties or title.

Can I still classify workers as independent contractors?

Yes, but the 2024 DOL rule makes the analysis more rigorous. Use the six-factor economic-reality test. If the worker is doing your core business, on your schedule, with your tools, the DOL will likely view them as an employee. When in doubt, consult an employment attorney before issuing a 1099.

How long do I need to keep employee time records?

At least 2 years for records used to compute wages (timesheets, time cards), and at least 3 years for payroll records. Many employers keep both for 3 years to reduce administrative complexity.

What happens during a DOL audit?

The DOL’s Wage and Hour Division will typically request payroll records, time records, and employee information for the past two to three years. Employers who can produce clean, timestamped records quickly are in a much stronger position. Employers who can’t produce them bear the burden of disproving the DOL’s calculation of back wages.

DOL Final Rule Changes for 2026: What Small Businesses Need to Know