Nonexempt Employee

What Is a Nonexempt Employee?

Nonexempt employees are workers who are entitled to earn the federal minimum wage and qualify for overtime pay, which is calculated as one-and-a-half times their hourly rate for every hour they work above and beyond a standard 40-hour workweek. These regulations are created by the federal Fair Labor Standards Act (FLSA).

Understanding Nonexempt Employees

“Nonexempt” is a term referring to employees who earn less than $684 per week, although that’s not always the case. This weekly wage, resulting in an annual threshold of $35,568, was put into effect on Jan. 1, 2020. It replaced the old weekly wage of $455.

Furthermore, nonexempt employees:

Nonexempt employees are expected to dutifully carry out orders, without interjecting their own management decisions. For this reason, nonexempt employees tend to dominate job sectors such as construction, maintenance, and other work that involves physical labor or carrying out repetitive tasks. Assembly line workers are a perfect example of nonexempt employees.

Nonexempt Employee Distinctions and Qualifications

Nonexempt employees are typically paid hourly wages, unlike exempt employees, who generally earn fixed salaries that are invariably significantly higher than what minimum-wage earners rake in. However, while nonexempt workers must receive overtime pay of one-and-a-half times their hourly wage, for all hours worked in excess of a 40-hour workweek, exempt employees are not legally entitled to collect overtime pay — even if their workweeks radically exceed 40 hours.

Nonexempt employees are entitled to overtime pay of at least 1.5 times their hourly wage when they work more than their regular 40-hour workweek.

Under the FLSA, workers may be considered nonexempt if they either earn less than the $684 weekly minimum or have limited scope for self-supervision. Take, for example, a maintenance worker who’s hired to work 40 hours per week, at $18 an hour. With typical weekly earnings of $720, they easily pass the salary test to be designated as an exempt worker, since their weekly income exceeds the $684 threshold. 

But this worker is also directly supervised and therefore has a minimal opportunity for independent judgment. Hence, they are ultimately classified as a nonexempt employee. If this staffer works 50 hours in a single week, they would earn their regular $18/hour rate for 40 hours, while earning 1.5 times their hourly rate at $27 for each of the 10 extra hours they clocked in.

Under the FLSA, nonexempt employees must earn at minimum the federal minimum hourly wage of $7.25; however, many states and some municipalities impose higher minimum wages than the federal floor. In these cases, the higher minimum wage overrides the federal rate.

Pros and Cons of Nonexempt Status

Whether it is preferable to be a nonexempt employee versus an exempt one largely depends on an individual’s priority for work-life balance. The biggest benefit to being a nonexempt employee is arguably the ability to enjoy additional compensation for working long hours, although this may be at a lower rate than salaried exempt employees. On the other hand, an exempt worker may be able to occasionally duck out of work early and still collect a full paycheck. That being said, nonexempt employees also tend to receive more protection under labor laws like the FLSA than exempt employees.

Because exempt employees are entitled to their full paycheck, they will receive a full salary every workweek, even if unforeseen circumstances such as a crisis require exempt employees to work remotely or under new arrangements.

On the flip side, nonexempt employees in these circumstances are not entitled to pay if their physical presence is required for their jobs and they are unable to perform their duties. Either way, nonexempt employees are required to log their hours. For example, nonexempt employees folding clothes at a retail store will not get paid if the store is either undergoing remodeling or closed on a given week.

Meanwhile, retail store managers who are exempt might still get paid nonetheless for remote work that they do in managing store operations.

Exempt workers are also more likely to receive benefits such as paid time off, healthcare coverage, and participation in retirement plans. However, both nonexempt and exempt employees are equally eligible for government employment benefits. Case in point: Both categories of workers qualify for Social Security benefits once they retire, and both may be eligible to collect weekly unemployment payments should they lose their jobs.