What is a Nonexempt (Hourly) Employee?

You may have noticed the terms "nonexempt" or "exempt employee" displayed on a job application. These terms are used under the Fair Labor Standards Act (FLSA) to determine whether employees are entitled to minimum wage and overtime protections. This article will examine nonexempt employees. To learn about salaried employees, check out our article about exempt employees.

Definition of a Nonexempt Employee

A nonexempt employee is an employee who is entitled to the minimum wage and overtime protections of the Fair Labor Standards Act (FLSA). Covered nonexempt employees generally must receive at least the applicable minimum wage and overtime pay at 1.5 times their regular rate of pay for hours worked over 40 in a workweek.

Nonexempt status does not depend solely on how an employee is paid. Nonexempt employees may be paid hourly, by salary, commission, piece rate, or another compensation method.

What does the FLSA provide?

The FLSA protects more than 155 million workers across more than 12 million workplaces in the U.S. It establishes federal minimum wage, overtime pay requirements, record-keeping guidelines, and youth employment standards. The FLSA's primary goal is to ensure an employee is paid fairly by his or her employer.

History of the Minimum Wage

In 1938, the federal government established the FLSA, requiring employers to pay employees no less than the minimum wage, which, at the time, was 25 cents per hour. It also requires employers to pay overtime for any hours worked exceeding 40 hours per workweek.

The federal minimum wage applies to all states in the union; however, many states have elected to choose alternative higher minimum wages to fit their local needs. For example, Washington, D.C., and Washington have the highest minimum wages at $18.40 and $17.13 per hour, respectively, as of Sept. 2026.

The steady increase in the minimum wage since its mandate in 1938

Nonexempt Employee Overtime Pay

Covered nonexempt employees generally must receive overtime pay for hours worked over 40 in a workweek, defined as a fixed and regularly recurring period of 168 hours.  Averaging the hours over two or more weeks is not permitted. The overtime rate must be at least one-and-a-half times the employee’s regular rate of pay. Also, the FLSA does not require overtime pay on specific days, such as Saturday, Sunday, or Holidays, and there is no cap on the number of hours an employee can work during a seven-day cycle.

If you're unsure about the overtime rules for your state, check out our webpage that explains state level overtime rules.

Nonexempt Employee Record Keeping

 The FLSA generally requires employers to retain payroll records, collective bargaining agreements, and sales and purchase records for at least three years. Records used to calculate wages, such as time cards and work schedules, generally must be retained for two years. Below is a complete list provided by the U.S. Department of Labor..

1. Employee's full name and social security number.
2. Address, including zip code.
3. Birthdate, if younger than 19.
4. Sex and occupation.
5. Time and day of week when employee's workweek begins.
6. Hours worked each day.
7. Total hours worked each workweek.
8. Basis on which employee's wages are paid (e.g., "$9 per hour", "$440 a week", "piecework")
9. Regular hourly pay rate.
10. Total daily or weekly straight-time earnings.
11. Total overtime earnings for the workweek.
12. All additions to or deductions from the employee's wages.
13. Total wages paid each pay period.
14. Date of payment and the pay period covered by the payment.

What Are Hours Worked?

Hours worked generally include time an employee is required to be on duty, on the employer’s premises, or otherwise engaged in work for the employer.  For a complete list of definitions for hours worked, please check out this fact sheet from the department of labor.

Overall, hours worked are:

• Any hours during regular business hours
• Paid rest periods lasting five to 20 minutes
•  Certain meetings, lectures, and training sessions may count as hours worked depending on whether attendance is required and other FLSA criteria
• Travel between job sites during work hours

Resources for Workers

You may have noticed a minimum wage poster pinned to the wall at work. Federal law states this poster must be visible for employees to see. The wage and hour division website does an excellent job of helping employees better understand their rights and how to file a complaint if an employer is believed to be in error.

Conclusion

We hope this article provides a better understanding of what a nonexempt employee is and the things you need to consider to remain compliant. Remember, each state may have its specific minimum wage and specific overtime rules. OnTheClock helps businesses accurately track hours and calculate overtime to support compliance with federal and state wage-and-hour requirements. 

Cited resources:

https://www.dol.gov/WHD/

https://en.wikipedia.org/wiki/Minimum_wage_in_the_United_States