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How to Determine if an Employee is Nonexempt

Federal Law - Definition of Nonexempt Employee

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What is a Nonexempt Employee?

The simplest definition of a “nonexempt” employee is an employee who is eligible to receive overtime pay. The term “nonexempt” (without hyphen) is preferred; however, “non-exempt” (with hyphen) is also considered acceptable and still widely used.

Hourly Workers Are Usually Automatically Nonexempt Employees

The term “hourly employee” is often used in place of “nonexempt” to describe an employee but certain computer professionals may be paid on an hourly basis but still considered "exempt" and therefore not eligible for overtime pay.

Nonexempt employees are not determined by their job title. A nonexempt employee is determined using a combination of criteria including their occupation (or industry), rate of pay, and the job duties that they perform.

Can Salaried Employees Be Nonexempt Employees?

Yes. Technically, exempt employees should be salaried and nonexempt employees are paid by the hour. But to simplify their payroll process many employers pay nonexempt workers a fixed rate each week, in other words a "salary." However, if the employee works more than 40 hours in a 7-day consecutive work week, they must still be paid for their overtime.

In U.S. v. Klinghoffer Brothers Realty, 285 F.2d 487 (2nd Cir. 1960), the U.S. Tax Court ruled that if a nonexempt, salaried employee works more than the "normal" week for the salary, but less than 40 hours, the employer is not required by law to pay for the additional hours worked.

In other words, a "salary" is automatically deemed to cover hours worked each week regardless of whether the salaried employee worked 20 hours or 40 hours in a given workweek.

How Federal Law Defines Nonexempt Employees

An employer may not arbitrarily classify any employee as exempt to avoid paying overtime but in 2004, the Bush administration adopted many new loopholes allowing for substantial exceptions in which an employer may be allowed to classify even manual labor jobs that have even the smallest amount of supervisory duties (like line or team leader) as an exempt position.

There is now considerable room for interpretation of which employees are eligible to receive overtime pay and individual state laws may vary (state laws are generally more favorable to employees than federal laws). So for legal and practical purposes, this article outlines only the minimum federal standards used to determine if an employee is exempt or nonexempt.

The following general guidelines are commonly used for determining nonexempt employees eligible for overtime pay:

  • Non-management, "blue-collar" hourly and salaried employees who perform manual labor; or

  • “White-collar” hourly and salaried employees; who also:

  • Earn less than $455 weekly, or less than $910 biweekly, or $1,971.66 monthly; and work for any of the following types of employers:

    • Educational institutions;
    • Employers that engage in interstate commerce;
    • Employers that gross $500,000 or more annually;
    • All Federal, state and local government agencies; or
    • Hospitals and other institutions engaged in the care of the sick, elderly, or mentally-ill.

Who Should I Contact if I have Questions or Problems About Overtime Pay?”

Contact the U.S. Department of Labor, Wage and Hour Division if you are an employer or employee of any of the following:
  • Private Business Sector,
  • State and Local Governments,
  • Federal Employees of the Library of Congress,
  • U.S. Postal Service,
  • Postal Rate Commission, or
  • Tennessee Valley Authority.

All other Federal employees should contact the U.S. Office of Personnel Management. The U.S. Congress is responsible for handling employee/employer issues for congressional employees.

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