A nonexempt position is where the FLSA's wage and hour rules bite the hardest. Nonexempt workers earn overtime for every hour over 40, must be paid at least the applicable minimum wage, and generate the time and pay records that the Department of Labor audits in two-thirds of its enforcement actions. The single biggest mistake employers make is classifying roles as exempt when the duties don't support exemption, and it shows up in every quarter's DOL back-wage collections. Getting nonexempt status right at the start is much cheaper than defending it in a collective action.
What Makes a Role Nonexempt Under the FLSA, every employee is nonexempt by default. A role only qualifies for exemption if it passes both the salary test (paid on a salary basis at or above the federal threshold) and the duties test (job duties match one of the specific exemption categories). Failing either test means the role is nonexempt, regardless of job title or pay structure.
Hourly workers are nearly always nonexempt because they fail the salary basis component. Salaried workers fall on either side depending on duties: a salaried retail supervisor whose primary work is stocking shelves is nonexempt; a salaried manager whose primary work is managing two or more full-time employees and directing operations can qualify for the executive exemption.
The 2026 Salary Threshold and State Variations The federal FLSA salary threshold sits at $35,568 annually after the 2024 Department of Labor rule was blocked in federal court. Several states set higher thresholds that override the federal floor for workers in those states. California's threshold is roughly $68,640 for 2026 (two times the state minimum wage for full-time work). New York, Washington, and Colorado all run state-specific thresholds above the federal number and adjust them annually.
What Counts as a Salaried Basis? Being paid on a salary basis means the employee receives a predetermined, fixed amount that doesn't vary with the quality or quantity of work performed. Docking pay for partial-day absences or for poor work destroys the salaried basis and converts the role back to nonexempt, with back overtime owed for the look-back period.
The Obligations That Attach to Nonexempt Roles Nonexempt roles require accurate time records: hours worked each day and total hours each week, for at least two years. Overtime is calculated on the regular rate, which includes non-discretionary bonuses, shift differentials, and commission payments, not just the base hourly rate. Missing that step understates overtime and creates back-wage exposure. Nonexempt workers also can't waive overtime by agreement; any clause purporting to let a nonexempt employee work over 40 hours without overtime is unenforceable.
Running a Nonexempt Classification Program That Survives an Audit Four habits separate clean payrolls from the ones that produce seven-figure back-wage findings. Audit classification annually against both tests. Use a written job description that reflects actual duties, updated when the role changes. Track time accurately, including pre-shift and post-shift work like donning gear, logging into systems, or checking email. And include overtime policy in the employee handbook so managers understand that unauthorized overtime still must be paid, even if the policy requires pre-approval. Compare classification decisions against exempt employee criteria in the Fair Labor Standards Act framework, and reference the DOL Wage and Hour Division guidance for current salary thresholds and duties test interpretations.
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