What Is a Nonexempt Employee?

Worker classification is critical. After you’ve narrowed down whether a worker is an independent contractor vs. employee, you’re not done. You need to also figure out if an employee is nonexempt. What is a nonexempt employee?

When an employee has nonexempt status, the Fair Labor Standards Act’s (FLSA) minimum wage and overtime laws come into play.

If you want to avoid FLSA penalties, you must understand nonexempt employee rules.

What is a nonexempt employee?

Employees with nonexempt worker status are not exempt from FLSA regulations. This means nonexempt employees are subject to minimum wage and overtime pay laws. Nonexempt employees are entitled to earn at least the federal, state, or local minimum wage—whichever is highest. And, employers must pay nonexempt employees overtime pay for any hours worked beyond 40 in a workweek.

An employee can either be exempt vs. nonexempt. If the employee is exempt, you do not owe them overtime wages.

How do you know if an employee is nonexempt?

The Fair Labor Standards Act sets requirements that help you accurately categorize your employee as exempt or nonexempt.

Employees are considered nonexempt unless they qualify for exemption under one of the following:

  1. Executive, administrative, or professional exemption
    • Earns a salary,
    • Makes at least $35,568 per year ($684 per week)**, AND
    • Has high-level job responsibilities that qualify for exemption (i.e., executive, administrative, or professional duties)
  2. Computer exemption
    • Receive a salary of at least $684 per week or a fee of at least $27.63 per hour,
    • Work as a computer system analyst, computer programmer, software engineer, or something similar, AND
    • Have primary duties that meet the FLSA’s computer exemption requirements
  3. Outside sales exemption
    • Has a primary duty of making sales or obtaining orders or contracts AND
    • Is regularly engaged away from the main business office
  4. Highly compensated employee exemption
    • Receive annual compensation totaling $107,432 or more
    • Perform at least one of the executive, administrative, or professional duties

**On July 1, 2024, the salary threshold will increase from $35,568 to $43,888. There will be another increase on January 1, 2025, to $58,656. Learn more about this new Final Rule on the U.S. Department of Labor’s website.

Keep in mind that some positions (i.e., blue-collar workers and first responders) are not eligible for exemption.

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A closer look at nonexempt employee rights

Nonexempt employees have a right to earn at least the minimum wage and overtime pay. Read on to learn more about your obligations for both.

Minimum wage

You must provide at least the minimum wage to nonexempt employees. The current federal minimum wage is $7.25 per hour.

Many states set their own minimum wage rate. And, some cities create a local minimum wage. Pay employees the highest minimum wage that applies to your locality.

Overtime pay

Nonexempt employees are entitled to overtime pay. Overtime wages are 1.5 times an employee’s regular hourly wage.

You must provide overtime wages when a nonexempt employee works more than 40 hours in a workweek.

Nonexempt status examples

Take a look at the examples below. Before looking at the answers, try to figure out whether the employee is nonexempt.

Example 1

Let’s say you hire an employee to work as a technician.

The employee does not have authority over other employees. And, they do not use independent judgment. The employee also does not need advanced knowledge to perform their job.

The employee earns a salary.

You pay the employee $38,000 per year.

Is the employee considered nonexempt? Yes

Example 2

You hire an employee to work 20 hours per week as a receptionist.

The employee’s job responsibilities include answering phone calls and transferring callers to the correct departments.

The employee earns hourly wages.

You pay the employee $240 per week.

Is the employee considered nonexempt? Yes

Example 3

You hire an IT technician for your business.

The technician has advanced knowledge in their field. They gained knowledge by taking courses.

The IT technician earns a salary.

You pay the IT technician $55,000 per year.

Is the employee considered nonexempt? No

Need a reliable way to pay your employees? Patriot’s online payroll software streamlines your payroll processing and makes it easy to pay your exempt and nonexempt workers. Get your free trial today!

This article has been updated from its original publication date of March 16, 2012.

This is not intended as legal advice; for more information, please click here.

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