What Are Non-Exempt Employees?

Definition & Examples of Non-Exempt Employees

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Non-exempt employees are entitled to federal minimum wage and overtime pay unless they meet certain tests for exemption.

Find out the requirements for someone to be considered a non-exempt employee.

What Are Non-Exempt Employees?

Non-exempt employees are employees who are subject to all Fair Labor Standards Act (FLSA) provisions including thepayment of overtime. They are normally required to account for all hours worked, usually using a timecard or other automated tracking system.

Employers must pay non-exempt employees time-and-a-half for overtime hours. It's important to ensure the appropriate classification of non-exempt employees. When exempt employees are reclassified as non-exempt employees, they gain the ability to earn overtime pay. However, if a non-exempt employee is reclassified as exempt, they lose that ability, even if they work extended hours.

How Do Non-Exempt Employees Work?

To know whether someone is exempt from FLSA rules, several different criteria apply. Salary is one: Employees must be paid a salary, and it must be at least $684 weekly.

Employers can use nondiscretionary bonuses and commissions to satisfy up to 10% of the salary requirements.

Job titles don't determine whether someone is exempt; rather, each employee's specific job duties and salary have to meet federal requirements. If they do not, they're non-exempt.

If an employee does not meet the tests for the following possible exemptions, they are considered non-exempt.

Executive: In addition to the salary requirement, to qualify for an executive exemption, an employee's primary duty must be to manage the enterprise or a department of it, have at least two full-time workers under their management, and have the authority to hire and fire.

Administrative: For an administrative exemption, the salary requirement applies, plus the employee must be engaged in office work related to the operations of the business, and they must be able to execute independent judgment on significant matters.

Professional: There are two types of professional exemptions: professional and learned. Employees must meet the following tests for a learned professional exemption: The must be paid no less than $684 weekly; they must be engaged in intellectual work that requires discretion and judgment; their advanced knowledge must be in a field of science or learning; and it must be acquired through an extended course of instruction.

For a creative professional exemption, the worker must meet the salary requirement and their primary work must involve talent, originality, or invention in a creative endeavor.

Computer employees: Computer employees may be paid either by a salary of at least $684 a week or hourly at a rate of at least $27.63 to be exempt. They must also be employed as a programmer, engineer, or similar role, and their duties must consist of implementing the design, development, or analysis for computer systems or programs.

Outside sales: For outside sales personnel to be exempt, their primary duty must be making sales, and they must be customarily working away from the office or place of business.

Highly compensated: Workers making more than $107,432 per year may be exempt if they regularly perform one of the duties of the above exempt executive, administrative, or professional employees.

Blue-collar workers (who are non-management and covered by the FLSA) are not exempt from overtime rules no matter how much salary they receive.

Notable Happenings

In 2015, during President Barack Obama's administration, the Department of Labor issued new guidance that raised the minimum salary level for exemption from overtime from the​ existing $23,660 to $47,476. The threshold hadn't been raised in years, and an increase would have helped millions of middle-wage workers be able to claim time-and-a-half for the hours they worked in excess of 40.

Proponents of the new rules noted that the new threshold would protect workers from being taken advantage of by their employers, seeing as the then-current threshold had been in place for many years and wasn't tied to the cost of living.

But doubling the minimum level brought swift legal challenges from businesses, who resisted the idea of making so many employees eligible for overtime pay. A Texas federal judge blocked the law in 2017, ruling that the U.S. Department of Labor overstepped in raising the threshold so drastically.

Salaried or exempt employees aren't required to account for hours worked and are responsible for completing their whole job as they see fit during whatever hours they care to work in addition to the workday. Some opponents to the rule change worried that making these workers track their time would create a divide between the exempt and non-exempt salaried employees.

A final rule was issued by the Department of Labor in 2019, during the Trump administration, which set the salary threshold at $35,568 annually (or $684 a week). Salaried employees making less than that are entitled to overtime pay. The law went into effect Jan. 1, 2020.

New DOL Guidance About Teleworking Nonexempt Employees

This is important news because it means that in most cases if an employer allows an employee to do remote work, employers do not have to look through information-technology records to investigate whether and when employees actually worked. Employers are allowed to use standard timekeeping procedures and ask employees to accurately report the hours worked.

"Employers must use reasonable diligence in tracking nonexempt telecommuters' work hours and may do this by providing a reporting procedure for unscheduled time, the Department of Labor (DOL) stated in Aug. 24 [2020] guidance. The workers then must be compensated for all reported work hours, even those not requested by the employer."

Key Takeaways

  • Non-exempt employees are entitled to the federal minimum wage and overtime pay in accordance with the Fair Labor Standards Act.
  • Employees may only be exempt from these laws if they meet specific tests put forth by the FLSA.
  • A law went into effect Jan. 1, 2020, setting the minimum salary threshold for exemption at $684 per week.