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2026 Pay Changes: Overtime, Bonuses, and “Exempt” Reclassification—What’s Legal in Michigan
For many Michigan employees, 2026 will feel like a pay change year before it ever sounds like one. Employers across the state are already preparing for updated wage and overtime rules—often quietly—by adjusting salaries, changing job classifications, or restructuring bonus programs. On paper, these moves are often described as “compliance.” In real life, they can mean fewer overtime hours, smaller paychecks, or sudden reclassification from hourly to salaried (or vice versa).
That disconnect matters. The law does not measure compliance by job titles or internal memos. It looks at how people are actually paid and what work they actually perform. A change that technically satisfies a regulation can still reduce a worker’s take-home pay in ways that are unlawful if it’s done incorrectly.
The Legal Framework: Federal Law vs. Michigan Law
Most pay discussions start with the Fair Labor Standards Act (FLSA), the federal law that governs minimum wage, overtime, and exemptions nationwide. Under the FLSA, most employees are entitled to overtime pay—time and a half—for all hours worked over 40 in a workweek unless they meet very specific exemption requirements.
Federal law also controls salary thresholds for exempt employees. When those thresholds increase, employers often respond by reclassifying workers, raising salaries just enough to stay above the line, or converting salaried employees to hourly status. These federal changes are a major reason 2026 is shaping up to be a reclassification year.
Michigan’s Workforce Opportunity Wage Act (WOWA) works alongside federal law and generally follows federal overtime standards. However, “generally follows” does not mean “employers get the benefit of the doubt.”
Overtime in 2026
Overtime Basics
The starting point has not changed. If you work more than 40 hours in a workweek, you are presumptively entitled to overtime pay at one-and-a-half times your regular rate—unless your employer can prove you are properly classified as exempt.
That burden matters. Overtime eligibility is the default, not the exception. Employers must prove an exemption applies; employees do not have to prove they deserve overtime.
Salary Threshold Increases and Why 2026 Is Different
In 2026, higher salary thresholds for exempt employees are expected to bring many workers back into overtime eligibility—especially lower-level managers, supervisors, and administrative employees who have been salaried for years.
For Michigan workers, this often plays out in one of three ways:
- Salaried employees are converted to hourly status and told it’s “just a formality.”
- Salaries are adjusted slightly to stay above the new exemption threshold.
- Job titles are changed without meaningful changes to job duties.
What employers sometimes overlook is that salary alone does not create an exemption. Even if you are paid on a salary basis and earn above the threshold, you must still meet strict job-duties tests. If your actual work hasn’t changed, you may suddenly qualify for overtime—even if your employer says otherwise.
Common Overtime Violations We See in Michigan
As employers adjust to 2026 changes, the same overtime problems keep showing up:
Off-the-clock work. Employees are expected to answer emails, take calls, or finish tasks outside scheduled hours without pay.
Miscounted hours. Travel time, pre-shift prep, post-shift wrap-up, and remote logins are ignored when calculating overtime.
Improper comp time. Private employers offering “comp time” instead of overtime pay—a practice that is generally illegal outside the public sector.
Bonuses, Commissions, and Incentive Pay
Discretionary vs. Nondiscretionary Bonuses
The law draws a sharp line between discretionary and nondiscretionary bonuses.
A discretionary bonus is one the employer decides to give (or not give) at the last minute, without advance promise or formula. Think: a surprise holiday bonus given solely at the employer’s discretion.
A nondiscretionary bonus, on the other hand, is one employees expect. If it’s tied to performance, productivity, attendance, sales numbers, safety metrics, or company profits, it is almost always nondiscretionary—even if the employer calls it “discretionary” in a policy manual.
Here’s the key point Michigan workers need to know:
Most “performance” bonuses count toward overtime calculations.
Red flags in bonus language include:
- “Earned if goals are met”
- “Based on performance metrics”
- “Guaranteed upon completion”
- “Calculated using a formula”
If employees can reasonably expect the bonus by doing their job, it usually must be included when calculating overtime.
How Bonuses Must Be Factored Into Overtime Pay
Overtime is not calculated based only on your hourly rate. It’s based on your regular rate of pay, which includes most nondiscretionary bonuses and incentives.
When a bonus covers a specific period—like a quarter or a year—employers must often go back and recalculate overtime retroactively to account for the increased regular rate. This is where many Michigan employers get it wrong.
Year-end bonuses are a frequent problem. Employers issue the bonus but fail to adjust overtime pay for the weeks the bonus was earned. That underpayment doesn’t disappear just because the bonus was paid later.
If your employer pays bonuses but never recalculates overtime, there’s a good chance you are being underpaid.
Commissioned Employees
Commission-based pay creates its own set of wage problems, especially in retail and sales roles.
Many Michigan employees are told they are “commissioned” and therefore not entitled to overtime. That is often incorrect.
Commissions do not automatically eliminate overtime rights. In many cases:
- Retail commissions still count toward the regular rate of pay
- Inside sales employees remain overtime-eligible
- Outside sales exemptions are narrowly defined and frequently misapplied
A common misclassification pattern is labeling a sales employee as “outside sales” when most of their work is done inside, remotely, or through assigned leads. Titles don’t control. Job duties do.
“Exempt” Status in 2026
What “Exempt” Really Means
To be exempt from overtime, an employee must generally meet all of the following:
- Be paid on a salary basis
- Earn at least the required minimum salary
- Perform specific types of job duties defined by law
Fail one test, and the exemption fails—regardless of job title or salary.
This is why job titles are legally irrelevant. Being called a “manager,” “administrator,” or “lead” does not determine exemption. What matters is what you actually do, day in and day out.
Common Exempt Categories—and How They’re Misused
Executive exemption:
Often misused when employees supervise people in name only but lack real authority over hiring, firing, or discipline.
Administrative exemption:
Frequently misapplied to employees who follow set procedures rather than exercise independent judgment on significant business matters.
Professional exemption:
Limited to specific learned professions. Experience alone does not qualify.
Computer/IT exemption:
One of the most abused categories. Many IT support, help desk, and systems employees are misclassified despite performing non-exempt work.
Across Michigan, we see workers labeled exempt while spending most of their time on routine, production-level tasks that legally require overtime pay.
Reclassification in 2026: What Employers Can—and Cannot—Do
Employers can legally reclassify employees to comply with new wage rules. But there are limits.
They cannot:
- Cut pay in a way that results in unpaid overtime
- Change exempt status without changing job duties
- Retaliate against employees who question the change
Reclassification does not give employers a free pass to reduce take-home pay or ignore overtime laws. If the work hasn’t changed, the legal analysis usually hasn’t changed either.
Don’t Let 2026 Pay Changes Cost You Money
Pay changes in 2026 are being framed as routine updates, compliance adjustments, or simple administrative shifts. For Michigan workers, they are often anything but simple. A new job title, a slightly higher salary, or a reworked bonus plan does not automatically make a pay practice legal. The law looks past labels and explanations and focuses on what actually happens to your pay and your hours.
Talk Directly With a Michigan Employment Lawyer
If your employer is changing your pay, overtime eligibility, bonus structure, or exempt status in 2026, getting clear legal answers early can protect both your income and your job. A confidential consultation—before or after a reclassification—can help you understand whether the changes are lawful and what options you have if they’re not.
Batey Law is focused exclusively on employment law. That focus matters when your livelihood is on the line. You deserve straight answers from a lawyer who understands how Michigan wage laws actually work in real workplaces.
Contact Information:
Batey Law Firm, PLLC
30200 Telegraph Rd., Suite 400
Bingham Farms, MI 48025
📞 248-540-6800