Employee or contractor. Exempt or non-exempt. Two decisions that set pay, taxes, and overtime, and are expensive to get wrong.
First decide whether the person is an employee at all. Only employees can be exempt or non-exempt.
Who controls how, when, and where the work is done? Is the worker running their own independent business? Different agencies use different tests, and the strictest one that applies usually wins.
Is the employee entitled to overtime? Exempt status requires passing a duties test, being paid on a salary basis, and meeting a minimum salary. All three, not one.
Exempt employees aren't owed overtime. To be exempt under federal law, and most state laws, a role must pass every test below.
The role's primary duties fit an exemption: executive, administrative, professional, computer, or outside sales. Actual work, not the job description.
Paid a predetermined salary that doesn't drop based on the quality or quantity of work.
At or above the minimum salary. Some states set this much higher than federal law.
Non-exempt. Paying overtime you didn't owe is cheaper than owing overtime you didn't pay.
Executive: manages the business or a department and directs 2 or more full-time employees. Administrative: office work tied to running the business, with independent judgment. Professional: advanced knowledge or creative work. Computer: systems analysis, programming, or software engineering.
Plus the editable Word template.