The U.S. Department of Labor’s Wage and Hour Division (WHD) is pushing a familiar two-track approach in 2026: provide clearer rules and compliance tools for employers trying to do the right thing, while concentrating enforcement resources on “truly bad actors” and egregious violations.
Speaking during the PayrollOrg Capital Summit session “Best Practices for Wage and Hour Compliance,” WHD Administrator Andrew Rogers, Esq. said the Division is working “to provide clarity and reduce uncertainty for American employers and workers,” while continuing enforcement priorities that include overtime, child labor in hazardous occupations, and new H‑1B-related initiatives.
A 2026 Rulemaking Agenda Centered on “Clarity” and Statutory Limits
Rogers emphasized that WHD’s regulatory posture is aimed at explaining—not expanding—what federal statutes require. “Regulations should explain, clarify and implement statutory requirements such that workers, unions and employers know precisely what the law requires,” he said. “Regulations should not expand or extend requirements beyond statutory limitations.”
Independent contractor rule: proposed rescission and “economic reality” test
Rogers led with WHD’s worker classification agenda, pointing to the Department’s February 27 proposed rule that would rescind the 2024 independent contractor rule and replace it with a standard intended to be more predictable and aligned with federal court precedent.
Under the proposal, WHD would apply an “economic reality test” that asks whether a worker is economically dependent on an employer (more likely an employee) or “in business for him or herself” (more likely an independent contractor). Rogers said two factors would “matter most”: “the nature and degree of the worker control over the work” and “the opportunity for profit and loss.”
He also flagged a key coverage change: the analysis would extend beyond the FLSA to the FMLA and the Migrant and Seasonal Agricultural Worker Protection Act, which use the FLSA definition of employee.
For payroll professionals, Rogers provided a concrete deadline: the comment period closes April 28. “You have a 60-day comment period, which closes at 11:59 p.m. on April 28,” he said.
Joint employment: WHD considering new guidance
Rogers said WHD is “currently considering” a notice of proposed rulemaking on joint employment under the FLSA—an area he described as a regulatory gap since 2021 and one where employers and workers have requested clarity.
In the question-and-answer portion of the session, Rogers underscored why joint employment can matter for payroll calculations: when two employers share a worker, “both become responsible for that employees work,” and “both become liable for everything,” including overtime exposure based on aggregated hours.
Overtime: 2019 thresholds remain as litigation continues
Rogers also provided an update on the overtime exemption salary thresholds. The 2024 overtime rule was vacated by the U.S. District Court for the Eastern District of Texas on November 15, 2024, he said, and WHD is enforcing the 2019 rule thresholds: $684 per week and $107,432 total annual compensation for highly compensated employees.
Compliance Assistance: Opinion Letters, Toolkits, and PAID
Rogers repeatedly returned to WHD’s compliance assistance posture, describing the agency’s goal as helping employers “avoid violations and focus on running their businesses.” He called the opinion letter program “an important component” of that effort and said additional letters are “in the works.”
He highlighted a batch of January opinion letters addressing issues that frequently become payroll pain points, including overtime exemptions and the regular rate. One letter (FLSA 2026‑2) addressed whether certain bonuses can be excluded from the regular rate—concluding, he said, that the bonuses at issue were discretionary and “therefore must be included in the regular rate.”
Rogers also promoted WHD’s PAID program (Payroll Audit Independent Determination), describing it as a structured approach for employers to self-audit, report minimum wage/overtime/FMLA issues, and correct them with WHD while reducing the risk of added penalties. “PAID is one of those rare programs that actually is a win, both for employees, employers and for taxpayers,” he said.
Enforcement: Overtime Dominates, Child Labor Remains a Major Focus
Rogers emphasized WHD’s “two-pronged approach” to enforcement: fast resolution of routine complaints to bring employers into compliance and return wages quickly, alongside targeted investigations aimed at “egregious violations” and intentional wrongdoing.
He reported that in 2025 the division recovered nearly $260 million in back wages for more than 175,000 workers, averaging “a little bit less than $1,500 per worker.”
Overtime issues remain the dominant category. “Violations of overtime rules continue to be the most common, and it’s really not even close,” Rogers said, adding they account for “nearly 80% of all FLSA back wage violations.”
On child labor, Rogers distinguished between minor violations and hazardous work, saying WHD is prioritizing the “worst forms of child labor,” especially minors in dangerous occupations. In fiscal year 2025, he said WHD concluded more than 950 child labor cases; 250 involved hazardous occupations; and the division assessed more than $37 million in civil monetary penalties.
New Initiative: “Project Firewall” Targets H‑1B Abuse
Rogers also previewed WHD’s enforcement posture around H‑1B compliance through a new initiative called Project Firewall, which he said aims to protect “America’s highly skilled workers through enforcement and compliance assistance.”
He noted that the Secretary of Labor has, for the first time, initiated a “secretary-certified investigation” tied to H‑1B enforcement and is evaluating others.
Q&A: Payroll-Driven Scenarios Put Compliance “In the Details”
The question-and-answer portion of the session, attendees raised several practical payroll questions, many involving the regular rate, deductions, worker classification, and reporting forms. Rogers repeatedly emphasized that the answer in each case depends on the specific facts and directed attendees to WHD regulations and compliance resources for further guidance.
Holiday pay: no special FLSA formula
When asked about holiday pay rules, Rogers said the FLSA does not prescribe a specific holiday premium formula. “There are no particular requirements in the FLSA with respect to holiday pay,” he said, emphasizing the baseline minimum wage and overtime requirements for nonexempt workers.
Remote stipends and regular rate: fact-dependent
On whether a remote-work stipend must be included in the regular rate when employees do not submit receipts, Rogers said it “depend[s] on some of the details,” including how the stipend is structured and whether there is evidence of actual business expense.
Salary basis: reduced hours generally not grounds to dock pay
A question about exempt employees working fewer than 40 hours drew a clear reminder about salary basis rules. Rogers said that “if you work a couple fewer hours in a week… that is not grounds to reduce a salary worker’s [pay],” pointing attendees to Part 541’s salary basis provisions and permitted deductions.
Earned wage access fees: watch minimum wage deductions
One of the more payroll-specific questions raised was about earned wage access (EWA) fees and whether they could create a minimum wage issue. Rogers said it depends on the details but flagged a bright-line risk area: deductions that “pull a worker’s wages below the federal minimum wage” are “always an area of prime concern.”
WH‑347 and fringe benefit reporting complexity
An attendee asked about compliance challenges with the updated WH‑347 certified payroll form—particularly the expanded fringe benefit reporting requirement, the distinction between funded vs. unfunded benefits, and the need for hourly breakout requirements. Rogers responded that the department is “always looking for ways in which we can improve those forms and additional guidance,” and encouraged stakeholders to provide specific feedback and recommendations.
Payroll Takeaway: What Payroll Pros Should Do Now
- Track worker classification developments. The WHD’s proposed independent contractor rule applies an “economic reality test”, and comments are due by April 28.
- Re-check overtime exemption thresholds. WHD is enforcing 2019 levels ($684/week; $107,432 annual compensation) after the 2024 rule was vacated.
- Consider joint employment as an overtime risk multiplier. When hours are aggregated across related entities, both employers may face potential liability.
- Audit regular-rate practices. The WHD emphasized that the treatment of bonuses and stipends may depend on whether those payments are properly classified as discretionary or as reimbursements for business expenses.
- Review employee deductions and third-party fees. Charges, including earned wage access fees, may create minimum wage compliance issues if they effectively reduce an employee’s pay below the federal minimum wage.
- Use WHD tools and consider PAID. Rogers described PAID as a “win” that can resolve self-identified violations faster and with less penalty exposure.
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