Nonexempt employees are guaranteed an hourly wage and overtime pay under the Fair Labor Standards Act. They must earn at least the federal or state minimum wage, which changes periodically, and receive overtime pay at one and a half times their regular rate for any hours worked beyond 40 in a workweek.
Nonexempt employees may be compensated hourly, by salary, by commission or by piece rate. Common examples of nonexempt positions include administrative assistants, customer service
representatives, data entry clerks, retail associates, servers, warehouse workers and interns. If a nonexempt employee is not paid hourly, their hourly rate can be calculated by dividing total
compensation by total hours worked; these hours must be
accurately tracked to ensure proper
overtime compliance. Vacation, holiday and sick time should not be included in calculating overtime unless the employee worked on those days.
In contrast, exempt employees receive a salary for their work, regardless of the number of hours required. They are not entitled to overtime pay or minimum wage protections. However, to be classified as exempt, employees must meet specific salary and duties tests established by the FLSA.
Independent contractors and freelancers are generally not covered by FLSA wage and hour protections, as they are not considered employees under the law.
A recent court ruling has impacted overtime regulations. In 2024, a Texas federal judge vacated the updated Overtime Rule, restoring the 2019 salary threshold. Consequently, executive, administrative and professional workers must meet the older salary and duties requirements to qualify as exempt. Highly compensated employees must also meet a higher salary threshold and certain job duty requirements to qualify as exempt.
State and local differences
State and local laws sometimes provide greater protections than the FLSA does. For example, some states require overtime pay after eight hours of work in a day. In such cases, employers must apply the rule that is most favorable to the employee.
Not all salaried employees are exempt. Certain industries — such as agriculture, movie theaters and railroads — have their own specific regulations. Misclassifying employees can lead to penalties, back pay obligations and legal risks.
This overview provides a general understanding of complex laws and provisions. Always consult a qualified professional for advice tailored to your situation.