From Susan M. Heathfield,
Your Guide to Human Resources.
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Definition:

A non-exempt employee is an employee who, because of the type of duties performed, the usual level of decision making authority, and the method of compensation, is subject to all FLSA provisions. Non-exempt employees are normally required to account for hours and fractional hours worked. Non-exempt employees must be compensated for all hour worked including overtime hours at the premium (time-and-one-half) rate of pay.

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Glossary Introduction.

Also Known As: Hourly Employee