Independent Contractor Exemption Certificate Application: Fill & Download for Free

if you have not provided your social security number to the company, they are mandated to withhold tax from you.Form 1099 Reporting and Backup WithholdingYou may also be responsible as a payer for reporting on Form 1099 payments made to a U.S. person. You must backup withhold 39.6% (or the applicable rate established by legislation amending IRC section 3406) from a reportable payment made to a U.S. person that is subject to Form 1099 reporting if:The U.S. person has not provided its TIN in the manner required,The IRS notifies you that the TIN furnished by the payee is incorrect,There has been a notified payee under-reporting, orThere has been a payee certification failure.Generally, a TIN must be provided by a U.S. non-exempt recipient on Form W-9. A payer files a tax return on Form 945(PDF) for backup withholding.You may be required to file Form 1099, and, if appropriate, backup withhold, even if you do not make the payments directly to that U.S. person. For example, you are required to report income paid to a foreign intermediary or flow-through entity that collects for a U.S. person subject to Form 1099 reporting. Refer to Identifying the Payee, for more information.Foreign persons who provide Form W-8BEN (PDF), Form W-8ECI (PDF), or Form W-8EXP (PDF) or applicable documentary evidence are exempt from backup withholding and Form 1099 reporting.

In the context of a legal agreement—which is what a term sheet is—a “schedule” is a list of things that are referenced in the agreement. Often, for complex agreements, there are many things that need to be listed. Examples might be:Names and salaries of employeesNames and ownership interests of shareholdersSoftware licensesPatents and intellectual propertyComputers and other owned equipmentLeases the company has signedEtc.Instead of putting all this directly into the agreement, they will instead be listed separately and attached to the end, with the agreement itself just saying something like “the employees as listed in Schedule A”.There is no particular order in which schedules are attached, although it is typically in the order in which they are referenced in the document. And for purposes of clarity, each schedule is numbered (or, more often, lettered, starting with “Schedule A”.)To give you an idea of the kind of schedules you might find in the actual closing documents of an investment (although likely not the term sheet), take a look at this typical due diligence list:A. Organization of the Company1. Describe the corporate or other structure of the legal entities that comprise the Company. Include any helpful diagrams or charts. Provide a list of the officers and directors of the Company and a brief description of their duties.2. Long-form certificate of good standing and articles or certificate of incorporation from Secretary of State or other appropriate official in the Company's jurisdiction of incorporation, listing all documents on file with respect to the Company, and a copy of all documents listed therein.3. Current by-laws of the Company.4. List of all jurisdictions in which the Company is qualified to do business and list of all other jurisdictions in which the Company owns or leases real property or maintains an office and a description of business in each such jurisdiction. Copies of the certificate of authority, good standing certificates and tax status certificates from all jurisdictions in which the Company is qualified to do business.5. All minutes for meetings of the Company's board of directors, board committees and stockholders for the last five years, and all written actions or consents in lieu of meetings thereof.6. List of all subsidiaries and other entities (including partnerships) in which the Company has an equity interest; organizational chart showing ownership of such entities; and any agreements relating to the Company's interest in any such entity.B. Ownership and Control of the Company1. Capitalization of the Company, including all outstanding capital stock, convertible securities, options, warrants and similar instruments.2. List of securityholders of the Company (including option and warrant holders), setting forth class and number of securities held.3. Copies of any voting agreements, stockholder agreements, proxies, transfer restriction agreements, rights of first offer or refusal, preemptive rights, registration agreements or other agreements regarding the ownership or control of the Company.C. Assets and Operations1. Annual financial statements with notes thereto for the past three fiscal years of the Company, and the latest interim financial statements since the end of the last fiscal year and product sales and cost of sales (including royalties) analysis for each product which is part of assets to be sold.2. All current budgets and projections including projections for product sales and cost of sales.3. Any auditors (internal and external) letters and reports to management for the past five years (and management's responses thereto).4. Provide a detailed breakdown of the basis for the allowance for doubtful accounts.5. Inventory valuation, including turnover rates and statistics, gross profit percentages and obsolescence analyses including inventory of each product which is part of assets to be sold.6. Letters to auditors from outside counsel.7. Description of any real estate owned by the Company and copies of related deeds, surveys, title insurance policies (and all documents referred to therein), title opinions, certificates of occupancy, easements, zoning variances, condemnation or eminent domain orders or proceedings, deeds of trust, mortgages and fixture lien filings.8. Schedule of significant fixed assets, owned or used by the Company, including the identification of the person holding title to such assets and any material liens or restrictions on such assets.9. Without duplication from Section D below, or separate intellectual property due diligence checklist, schedule of all intangible assets (including customer lists and goodwill) and proprietary or intellectual properties owned or used in the Company, including a statement as to the entity holding title or right to such assets and any material liens or restrictions on such assets. Include on and off balance sheet items.D. Intellectual PropertyList of all patents, trademarks, tradenames, service marks and copyrights owned or used by the Company, all applications therefor and copies thereof, search reports related thereto and information about any liens or other restrictions and agreements on or related to any of the foregoing (without duplication from attached intellectual property due diligence checklist).E. Reports1. Copies of any studies, appraisals, reports, analyses or memoranda within the last three years relating to the Company (i.e., competition, products, pricing, technological developments, software developments, etc.).2. Current descriptions of the Company that may have been prepared for any purpose, including any brochures used in soliciting or advertising.3. Descriptions of any customer quality awards, plant qualification/certification distinctions, ISO certifications or other awards or certificates viewed by the Company as significant or reflective of superior performance.4. Copies of any analyst or other market reports concerning the Company known to have been issued within the last three years.5. Copies of any studies prepared by the Company regarding the Company's insurance currently in effect and self-insurance program (if any), together with information on the claim and loss experience thereunder.6. Any of the following documents filed by the Company or affiliates of the Company and which contain information concerning the Company: annual reports on SEC Form 10-K; quarterly reports on SEC Form 10-Q; current reports on SEC Form 8-K.F. Compliance with Laws1. Copies of all licenses, permits, certificates, authorizations, registrations, concessions, approvals, exemptions and other operating authorities from all governmental authorities and any applications therefor, and a description of any pending contemplated or threatened changes in the foregoing.2. A description of any pending or threatened proceedings or investigations before any court or any regulatory authority.3. Describe any circumstance where the Company has been or may be accused of violating any law or failing to possess any material license, permit or other authorization. List all citations and notices from governmental or regulatory authorities.4. Schedule of the latest dates of inspection of the Company's facilities by each regulatory authority that has inspected such facilities.5. Description of the potential effect on the Company of any pending or proposed regulatory changes of which the Company is aware.6. Copies of any information requests from, correspondence with, reports of or to, filings with or other material information with respect to any regulatory bodies which regulate a material portion of the Company's business. Limit response to the last five years unless an older document has a continuing impact on the Company.7. Copies of all other studies, surveys, memoranda or other data on regulatory compliance including: spill control, environmental clean-up or environmental preventive or remedial matters, employee safety compliance, import or export licenses, common carrier licenses, problems, potential violations, expenditures, etc.8. State whether any consent is necessary from any governmental authority to embark upon or consummate the proposed transaction.9. Schedule of any significant U.S. import or export restrictions that relate to the Company's operations.10. List of any export, import or customs permits or authorizations, certificates, registrations, concessions, exemptions, etc., that are required in order for the Company to conduct its business and copies of all approvals, etc. granted to the Company that are currently in effect or pending renewal.11. Any correspondence with or complaints from third parties relating to the marketing, sales or promotion practices of the Company.G. Environmental Matters1. A list of facilities or other properties currently or formerly owned, leased, or operated by the Company and its predecessors, if any.2. Reports of environmental audits or site assessments in the possession of the Company, including any Phase I or Phase II assessments or asbestos surveys, relating to any such facilities or properties.3. Copies of any inspection reports prepared by any governmental agency or insurance carrier in connection with environmental or workplace safety and health regulations relating to any such facilities or properties.4. Copies of all environmental and workplace safety and health notices of violations, complaints, consent decrees, and other documents indicating noncompliance with environmental or workplace safety and health laws or regulations, received by the Company from local, state, or federal governmental authorities. If available, include documentation indicating how such situations were resolved.5. Copies of any private party complaints, claims, lawsuits or other documents relating to potential environmental liability of the Company to private parties.6. Listing of underground storage tanks currently or previously present at the properties and facilities listed in response to Item 1 above, copies of permits, licenses or registrations relating to such tanks, and documentation of underground storage tank removals and any associated remediation work.7. Descriptions of any release of hazardous substances or petroleum known by the Company to have occurred at the properties and facilities listed in response to Item 1, if such release has not otherwise been described in the documents provided in response to Items 1-6 above.8. Copies of any information requests, PRP notices, "106 orders," or other notices received by the Company pursuant to CERCLA or similar state or foreign laws relating to liability for hazardous substance releases at off-site facilities.9. Copies of any notices or requests described in Item 8 above, relating to potential liability for hazardous substance releases at any properties or facilities described in response to Item 1.10. Copies of material correspondence or other documents (including any relating to the Company's share of liability) with respect to any matters identified in response to Items 8 and 9.11. Copies of any written analyses conducted by the Company or an outside consultant relating to future environmental activities (i.e., upgrades to control equipment, improvements in waste disposal practices, materials substitution) for which expenditure of funds greater than $10,000 is either certain or reasonably anticipated within the next five years and an estimate of the costs associated with such activities.12. Description of the workplace safety and health programs currently in place for the Company's business, with particular emphasis on chemical handling practices.H. Litigation1. List of all litigation, arbitration and governmental proceedings relating to the Company to which the Company or any of its directors, officers or employees is or has been a party, or which is threatened against any of them, indicating the name of the court, agency or other body before whom pending, date instituted, amount involved, insurance coverage and current status. Also describe any similar matters which were material to the Company and which were adjudicated or settled in the last ten years.2. Information as to any past or present governmental investigation of or proceeding involving the Company or the Company's directors, officers or employees.3. Copies of all attorneys' responses to audit inquiries.4. Copies of any consent decrees, orders (including applicable injunctions) or similar documents to which the Company is a party, and a brief description of the circumstances surrounding such document.5. Copies of all letters of counsel to independent public accountants concerning pending or threatened litigation.6. Any reports or correspondence related to the infringement by the Company or a third party of intellectual property rights.I. Significant Contracts and Commitments1. Contracts relating to any completed (during the past 10 years) or proposed reorganization, acquisition, merger, or purchase or sale of substantial assets (including all agreements relating to the sale, proposed acquisition or disposition of any and all divisions, subsidiaries or businesses) of or with respect to the Company.2. All joint venture and partnership agreements to which the Company is a party.3. All material agreements encumbering real or personal property owned by the Company including mortgages, pledges, security agreements or financing statements.4. Copies of all real property leases relating to the Company (whether the Company is lessor or lessee), and all leasehold title insurance policies (if any).5. Copies of all leases of personal property and fixtures relating to the Company (whether the Company is lessor or lessee), including, without limitation, all equipment rental agreements.6. Guarantees or similar commitments by or on behalf of the Company, other than endorsements for collection in the ordinary course and consistent with past practice.7. Indemnification contracts or arrangements insuring or indemnifying any director, officer, employee or agent against any liability incurred in such capacity.8. Loan agreements, notes, industrial revenue bonds, compensating balance arrangements, lines of credit, lease financing arrangements, installment purchases, etc. relating to the Company or its assets and copies of any security interests or other liens securing such obligations.9. No-default certificates and similar documents delivered to lenders for the last five (or shorter period, if applicable) years evidencing compliance with financing agreements.10. Documentation used internally for the last five years (or shorter time period, if applicable) to monitor compliance with financial covenants contained in financing agreements.11. Any correspondence or documentation for the last five years (or shorter period, if applicable) relating to any defaults or potential defaults under financing agreements.12. Contracts involving cooperation with other companies or restricting competition.13. Contracts relating to other material business relationships, including:a. any current service, operation or maintenance contracts;b. any current contracts with customers;c. any current contracts for the purchase of fixed assets; andd. any franchise, distributor or agency contracts.14. Without duplicating Section D above or the intellectual property due diligence schedule hereto, contracts involving licensing, know-how or technical assistance arrangements including contracts relating to any patent, trademark, service mark and copyright registrations or other proprietary rights used by the Company and any other agreement under which royalties are to be paid or received.15. Description of any circumstances under which the Company may be required to repurchase or repossess assets or properties previously sold.16. Data processing agreements relating to the Company.17. Copies of any contract by which any broker or finder is entitled to a fee for facilitating the proposed transaction or any other transactions involving the Company or its properties or assets.18. Management, service or support agreements relating to the Company, or any power of attorney with respect to any material assets or aspects of the Company.19. List of significant vendor and service providers (if any) who, for whatever reason, expressly decline to do business with the Company.20. Samples of all forms, including purchase orders, invoices, supply agreements, etc.21. Any agreements or arrangements relating to any other transactions between the Company and any director, officer, stockholder or affiliate of the Company (collectively, "Related Persons"), including but not limited to:a. Contracts or understandings between the Company and any Related Person regarding the sharing of assets, liabilities, services, employee benefits, insurance, data processing, third-party consulting, professional services or intellectual property.b. Contracts or understandings between Related Persons and third parties who supply inventory or services through Related Persons to the Company.c. Contracts or understandings between the Company and any Related Person that contemplate favorable pricing or terms to such parties.d. Contracts or understandings between the Company and any Related Person regarding the use of hardware or software.e. Contracts or understandings regarding the maintenance of equipment of any Related Person that is either sold, rented, leased or used by the Company.f. Description of the percentage of business done by the Company with Related Persons.g. Covenants not to compete and confidentiality agreements between the Company and a Related Person.h. List of all accounts receivable, loans and other obligations owing to or by the Company from or to a Related Person, together with any agreements relating thereto.22. Copies of all insurance and indemnity policies and coverages carried by the Company including policies or coverages for products, properties, business risk, casualty and workers compensation. A description of any self-insurance or retro-premium plan or policy, together with the costs thereof for the last five years. A summary of all material claims for the last five years as well as aggregate claims experience data and studies.23. List of any other agreements or group of related agreements with the same party or group of affiliated parties continuing over a period of more than six months from the date or dates thereof, not terminable by the Company on 30 days' notice.24. Copies of all supply agreements relating to the Company and a description of any supply arrangements.25. Copies of all contracts relating to marketing and advertising.26. Copies of all construction agreements and performance guarantees.27. Copies of all secrecy, confidentiality and nondisclosure agreements.28. Copies of all agreements related to the development or acquisition of technology.29. Copies of all agreements outside the ordinary course of business.30. Copies of all warranties offered by the Company with respect to its product or services.31. List of all major contracts or understandings not otherwise previously disclosed under this section, indicating the material terms and parties.32. For any contract listed in this Section I, state whether any party is in default or claimed to be in default.33. For any contract listed in this Section I, state whether the contract requires the consent of any person to assign such contract or collaterally assign such contract to any lender.NOTE: Remember to include all amendments, schedules, exhibits and side letters. Also include brief description of any oral contract listed in this Section I.J. Employees, Benefits and Contracts1. Copies of the Company's employee benefit plans as most recently amended, including all pension, profit sharing, thrift, stock bonus, ESOPs, health and welfare plans (including retiree health), bonus, stock option plans, direct or deferred compensation plans and severance plans, together with the following documents:a. all applicable trust agreements for the foregoing plans;b. copies of all IRS determination letters for the foregoing qualified plans;c. latest IRS forms for the foregoing qualified plans, including all annual reports, schedules and attachments;d. latest copies of all summary plan descriptions, including modifications, for the foregoing plans;e. latest actuarial evaluations with respect to the foregoing defined benefit plans; andf. schedule of fund assets and unfunded liabilities under applicable plans.2. Copies of all employment contracts, consulting agreements, severance agreements, independent contractor agreements, non-disclosure agreements and non-compete agreements relating to any employees of the Company.3. Copies of any collective bargaining agreements and related plans and trusts relating to the Company (if any). Description of labor disputes relating to the Company within the last three years. List of current organizational efforts and projected schedule of future collective bargaining negotiations (if any).4. Copies of all employee handbooks and policy manuals (including affirmative action plans).5. Copies of all OSHA examinations, reports or complaints.6. The results of any formal employee surveys.K. Tax Matters1. Copies of returns for the three prior closed tax years and all open tax years for the Company (including all federal and state consolidated returns) together with a work paper therefor wherein each item is detailed and documented that reconciles net income as specified in the applicable financial statement with taxable income for the related period.2. Audit and revenue agents reports for the Company; audit adjustments proposed by the Internal Revenue Service for any audited tax year of the Company or by any other taxing authority; or protests filed by the Company.3. Settlement documents and correspondence for last six years involving the Company.4. Agreements waiving statute of limitations or extending time involving the Company.5. Description of accrued federal, state and local withholding taxes and FICA for the Company.6. List of all state, local and foreign jurisdictions in which the Company pays taxes or collects sales taxes from its retail customers (specifying which taxes are paid or collected in each jurisdiction).L. Miscellaneous1. Information regarding any material contingent liabilities and material unasserted claims and information regarding any asserted or unasserted violation of any employee safety and environmental laws and any asserted or unasserted pollution clean-up liability.2. List of the ten largest customers and suppliers for each product or service of the Company.3. List of major competitors for each business segment or product line.4. Any plan or arrangement filed or confirmed under the federal bankruptcy laws, if any.5. A list of all officers, directors and stockholders of the Company.6. All annual and interim reports to stockholders and any other communications with securityholders.7. Description of principal banking and credit relationships (excluding payroll matters), including the names of each bank or other financial institution, the nature, limit and current status of any outstanding indebtedness, loan or credit commitment and other financing arrangements.8. Summary and description of all product, property, business risk, employee health, group life and key-man insurance.9. Copies of any UCC or other lien, judgment or suit searches or filings related to the Company in relevant states conducted in the past three years.10. Copies of all filings with the Securities and Exchange Commission, state blue sky authorities or foreign security regulators or exchanges.11. All other information material to the financial condition, businesses, assets, prospects or commercial relations of the Company.

This is not a simple answer as other people have tried to make it. The DOL estimates 70% of businesses misclassify either between Independent Contractor and Employee and between exempt and non exempt for overtime. If you are exempt you can be salary. If you are not exempt from the overtime rules under the FLSA you are an hourly employee.Technical details follow from my new bookChapter Three - EarningsWe are now going to move into the heart of payroll, earnings. The first thing you have to do, now that you know who is an employee and who is not, is to make a further distinction.Who is salary and who is hourly?We will cover commissions, piecework tips and the rest a little later. You don’t get to choose who is a salaried worker and who is an hourly worker nor do the employees get to choose. It comes down to provision of the Fair Labor Standards Act (FLSA) which is the Federal Law that governs much of wages and employment. FLSA sets out the rules on who is entitled to overtime pay if they work more than 40 hours in a workweek. Those who are entitled to overtime are referred to as “Non-exempt” (from overtime rules) and they are paid by the hour. Those who are not subject to overtime rules are referred to as “Exempt” and they are normally paid a salary. Let’s dive in.SalaryIf you are a small business owner and you are hiring only labor and clerical help, this is simple. You are salary exempt and everybody else is hourly and non-exempt. The labor department has statistics that show as many as 70% of employers misclassify employees. The cost can be staggering as you and your company may be liable for all unpaid overtime and taxes going back for years.We are going to lay out some fairly specific criteria for determining exempt versus non-exempt employees. If you have any doubt about the correct calculation, the Federal Department of Labor has a series of “Fact Sheets” that give more detail and references. Or consult with a local CPA who is an employment tax expert.Section 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, professional and outside sales employees. To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week. Job titles do not determine exempt status. In order for an exemption to apply, an employee’s specific job duties and salary must meet all the requirements of the Department’s regulations.Executive ExemptionTo qualify for the executive employee exemption, all of the following tests must be met:The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $455.00 per week;The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; anThe employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.Primary Duty“Primary Duty” means the principal, main, major or most important duty that the employee performs. Determination of an employee’s primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole.ManagementGenerally, “management” includes, but is not limited to, activities such as interviewing, selecting, and training of employees; setting and adjusting their rates of pay and hours of work; directing the work of employees; maintaining production or sales records for use in supervision or control; appraising employees’ productivityDepartment or SubdivisionThe phrase “a customarily recognized department or subdivision” is intended to distinguish between a mere collection of employees assigned from time to time to a specific job or series of jobs and a unit with permanent status and function.Customarily and RegularlyThe phrase “customarily and regularly” means greater than occasional but less than constant; it includes work normally done every workweek, but does not include isolated or one-time tasks.Two or MoreThe phrase “two or more other employees” means two full-time employees or their equivalent.Exemption of Business OwnersUnder a special rule for business owners, an employee who owns at least a bona fide 20-percent equity interest in the enterprise in which employed, regardless of the type of business organization (e.g., corporation, partnership, or other), and who is actively engaged in its management, is considered a bona fide exempt executive.Highly Compensated EmployeesHighly compensated employees performing office or non-manual work and paid total annual compensation of $100,000.00.00 or more (which must include at least $455.00 per week paid on a salary or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption.Administrative ExemptionTo qualify for the administrative employee exemption, all of the following tests must be met.The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455.00 per week;The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; andThe employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. “Primary duty” means the principal, main, major or most important duty that the employee performs.Primary DutyDetermination of an employee’s primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole.Directly Related to Management or General Business OperationsTo meet the “directly related to management or general business operations” requirement, an employee must perform work directly related to assisting with the running or servicing of the business, as distinguished, for example from working on a manufacturing productionline, or selling a product in a retail or service establishment. Work “directly related to management or general business operations” includes, but is not limited to, work in functional areas such as tax finance, accounting, budgeting, auditing, insurance, quality control, purchasing, procurement, advertising, marketing, research, safety and health, personnel management, human resources employee benefits, labor relations, public relations, government relations, computer network, Internet and database administration legal and regulatory compliance, and similar activities.Employer’s CustomersAn employee may qualify for the administrative exemption if the employee’s primary duty is the performance of work directly related to the management or general business operations of the employer’s customers. Thus, employees acting as advisors or consultants to their employer’s clients or customers — as tax experts or financial consultants, for example — may be exempt.Discretion and IndependentJudgmentIn general, the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct and acting or making a decision after the various possibilities have been considered. The term must be applied in the light of all the facts involved in the employee’s particular employment situation, and implies that the employee has authority to make an independent choice, free from immediate direction or supervision.Matters of SignificanceThe term “matters of significance” refers to the level of importance or consequence of the work performed. An employee does not exercise discretion and independent judgment with respect to matters of significance merely because the employer will experience financial losses if the employee fails to perform the job properly. Similarly, an employee who operates very expensive equipment does not exercise discretion and independent judgment with respect to matters of significance merely because improper performance of the employee’s duties may cause serious financial loss to the employer.Educational Establishments and Administrative FunctionsThe administrative exemption is also available to employees compensated on a salary or fee basis at a rate not less than $455.00 a week; on a salary basis which is at least equal to the entrance salary for teachers in the same educational establishment, and whose primary duty is performing administrative functions directly related to academic instruction or training in an educational establishment. Academic administrative functions include operations directly in the field of education, and do not include jobs relating to areas outside the educational field. Employees engaged in academic administrative functions include: the superintendent or other head of an elementary or secondary school system, and any assistants responsible for administration of such matters as curriculum, quality and methods of instructing, measuring and testing the learning potential and achievement of students, establishing and maintaining academic and grading standards, and other aspects of the teaching program; the principal and any vice-principals responsible for the operation of an elementary or secondary school; department heads in institutions of higher education responsible for the various subject matter departments; academic counselors and other employees with similar responsibilities. Having a primary duty of performing administrative functions directly related to academic instruction or training in an educational establishment includes, by its very nature, exercising discretion and independent judgment with respect to matters of significance. [GP1]Highly Compensated EmployeesHighly compensated employees performing office or non-manual work and paid total annual compensation of $100,000.00.00 or more (which must include at least $455.00 per week paid on a salary or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption.Learned Professional ExemptionTo qualify for the learned professional employee exemption, all of the following tests must be met:The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455.00 per week.The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment.Work Requiring Advanced Knowledge“Work requiring advanced knowledge” means work which is predominantly intellectual in character, and which includes work requiring the consistent exercise of discretion and judgment. Professional work is therefore distinguished from work involving routine mental, manual, mechanical or physical work.A professional employee generally uses the advanced knowledge to analyze, interpret or make deductions from varying facts or circumstances. Advanced knowledge cannot be attained at the high school level. Field of science or learning fields of science or learning include law, medicine, theology, accounting, actuarial computation, engineering, architecture, teaching, various types of physical, chemical and biological sciences, pharmacy and other occupations that have a recognized professional status, and are distinguishable from the mechanical arts or skilled trades where the knowledge could be of a fairly advanced type, but is not in a field of science or learning.Customarily Acquired by a Prolonged Course of Specialized Intellectual InstructionThe learned professional exemption is restricted to professions where specialized academic training is a standard prerequisite for entrance into the profession. The best evidence of meeting this requirement is having the appropriate academic degree. However, the word “customarily” means the exemption may be available to employees in such professions who have substantially the same knowledge level and perform substantially the same work as the degreed employees, but who attained the advanced knowledge through a combination of work experience and intellectual instruction. This exemption does not apply to occupations in which most employees acquire their skill by experience rather than by advanced specialized intellectual instruction.Creative Professional ExemptionTo qualify for the creative professional employee exemption, all of the following tests must be met.• The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week.• The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.Invention, Imagination, Originality or TalentThis requirement distinguishes the creative professions from work that primarily depends on intelligence, diligence and accuracy. Exemption as a creative professional depends on the extent of the invention, imagination, originality or talent exercised by the employee. Whether the exemption applies, therefore, must be determined on a case-by-case basis.The requirements are generally met by actors, musicians, composers, soloists, certain painters, writers, cartoonists, essayists, novelists, and others as set forth in the regulations. Journalists may satisfy the duties requirements for the creative professional exemption if their primary duty is work requiring invention, imagination, originality or talent. Journalists are not exempt creative professionals if they only collect, organize and record information that is routine or already public, or if they do not contribute a unique interpretation or analysis to a news product.TeachersTeachers are exempt if their primary duty is teaching, tutoring, instructing or lecturing in the activity of imparting knowledge, and if they are employed and engaged in this activity as a teacher in an educational establishment. Exempt teachers include, but are not limited to, regular academic teachers; kindergarten or nursery school teachers; teachers of gifted or disabled children; teachers of skilled and semi-skilled trades and occupations; teachers engaged in automobile driving instruction; aircraft flight instructors; home economics teachers; and vocal or instrument music teachers. The salary and salary basis requirements do not apply to bona fide teachers. Having a primary duty of teaching, tutoring, instructing or lecturing in the activity of imparting knowledge includes, by its very nature, exercising discretion and judgment. [GP2]Practice of Law or MedicineAn employee holding a valid license or certificate permitting the practice of law or medicine is exempt if the employee is actually engaged in such a practice. An employee who holds the requisite academic degree for the general practice of medicine is also exempt if he or she is engaged in an internship or resident program for the profession. The salary and salary basis requirements do not apply to bona fide practitioners of law or medicine.Highly Compensated EmployeesHighly compensated employees performing office or non-manual work and paid total annual compensation of $100,000.00 or more (which must include at least $455* per week paid on a salary or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption.Computer Employee ExemptionTo qualify for the computer employee exemption, the following tests must be met.• The employee must be compensated either on a salary or fee basis at a rate not less than $455 per week or, if compensated on an hourly basis, at a rate not less than $27.63 an hour;• The employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below. The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications.The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications,The design, documentation, testing, creation or modification of computer programs related to machine operating systems, orA combination of the aforementioned duties, the performance of which requires the same level of skills.The computer employee exemption does not include employees engaged in the manufacture or repair of computer hardware and related equipment. Employees whose work is highly dependent upon, or facilitated by, the use of computers and computer software programs (e.g., engineers, drafters and others skilled in computer aided design software), but who are not primarily engaged in computer systems analysis and programming or other similarly skilled computer-related occupations identified in the primary duties test described above, are also not exempt under the computer employee exemption.Primary Duty“Primary duty” means the principal, main, major or most important duty that the employee performs. Determination of an employee’s primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole.Outside Sales ExemptionTo qualify for the outside sales employee exemption, all of the following tests must be met.• The employee’s primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services, or for the use of facilities for which a consideration will be paid by the client or customer; and• The employee must be customarily and regularly engaged away from the employer’s place of business.The salary requirements of the regulation do not apply to the outside sales exemption. An employee who does not satisfy the requirements of the outside sales exemption may still qualify as an exempt employee under one of the other exemptions allowed by Section 13(a)(1) of the FLSA and the Part 541 regulations if all the criteria for the exemption is met.Primary Duty“Primary duty” means the principal, main, major, or most important duty that the employee performs. Determination of an employee’s primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole.Making Sales“Making Sales” includes any sale, exchange, contract to sell, consignment for sales, shipment for sale, or other disposition. It includes the transfer of title to tangible property, and in certain cases, of tangible and valuable evidences of intangible property. Obtaining orders or contracts for services or for the use of facilities obtaining orders for “the use of facilities” includes the selling of time on radio or television, the solicitation of advertising for newspapers and other periodicals, and the solicitation of freight for railroads and other transportation agencies.The word “services” extends the exemption to employees who sell or take orders for a service, which may be performed for the customer by someone other than the person taking the order.Customarily and RegularlyThe phrase “customarily and regularly” means greater than occasional but less than constant. It includes work normally done every workweek, but does not include isolated or one-time tasks.Away from Employer’s Place of BusinessAn outside sales employee makes sales at the customer’s place of business, or, if selling door-to-door, at the customer’s home. Outside sales does not include sales made by mail, telephone or the Internet unless such contact is used merely as an adjunct to personal calls.Any fixed site, whether home or office, used by a salesperson as a headquarters or for telephonic solicitation of sales, is considered one of the employer’s places of business, even though the employer is not in any formal sense the owner or tenant of the property.Promotion WorkPromotion work may or may not be exempt outside sales work, depending upon the circumstances under which it is performed. Promotional work that is actually performed incidental to and in conjunction with an employee’s own outside sales or solicitations is exempt work. However, promotion work that is incidental to sales made, or to be made, by someone else is not exempt outside sales work.Drivers Who SellDrivers who deliver products and also sell such products may qualify as exempt outside sales employees only if the employee has a primary duty of making sales. Several factors should be considered in determining whether a driver has a primary duty of making sales, including· a comparison of the driver’s duties with those of other employees engaged as drivers and as salespersons;· the presence or absence of customary or contractual arrangements concerning amounts of products to be delivered;· whether or not the driver has a selling or solicitor’s license when required by law;· the description of the employee’s occupation in collective bargaining agreements;· and other factors set forth in the regulation.Salary Basis RequirementTo qualify for the outside sales exemption, employees generally must be paid at not less than $455* per week on a salary basis. These salary requirements do not apply to outside sales employees, teachers, and employees practicing law or medicine. Exempt computer employees may be paid at least $455 on a salary basis or on an hourly basis at a rate not less than $27.63 an hour.Being paid on a “salary basis” means an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis. The predetermined amount cannot be reduced because of variations in the quality or quantity of the employee’s work. Subject to exceptions in the next section, an exempt employee must receive the full salary for any week in which the employee performs any work, regardless of the number of days or hours worked.Exempt employees do not need to be paid for any workweek in which they perform no work. If the employer makes deductions from an employee’s predetermined salary, i.e., because of the operating requirements of the business, that employee is not paid on a “salary basis.” If the employee is ready, willing and able to work, deductions may not be made for time when work is not available.When an Employer May Make Deductions from Salary PayrollThis section is where a well written handbook is necessary if you have exempt employees besides yourself and want time off policies in place. See Chapter Sixteen.Deductions from pay are permissible when an exempt employee:• Is absent from work for one or more full days for personal reasons other than sickness or disability;• For absences of one or more full days due to sickness or disability• If the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness;• To offset amounts employees receive as jury or witness fees, or for military pay;• For penalties imposed in good faith for infractions of safety rules of major significance;• For unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions.Also, an employer is not required to pay the full salary in the initial or terminal week of employment, or for weeks in which an exempt employee takes unpaid leave, under the Family and Medical Leave Act.HourlyThe Fair Labor Standards Act (FLSA or Act) is administered by the Wage and Hour Division (WHD) of the US Department of Labor. The Act establishes standards for minimum wages, overtime pay, recordkeeping, and child labor. These standards affect more than 135 million workers, both full-time and part-time, in the private and public sectors.The Act covers enterprises with employees who engage in interstate commerce, produce goods for interstate commerce; or handle, sell, or work on goods or materials that have been moved in or produced for interstate commerce. For most firms, a threshold of $500,000.00.00 in annual dollar volume of business applies to be covered (i.e., the Act does not cover enterprises with less than this amount of business).In addition, the Act covers the following regardless of their dollar volume of business:· hospitals;· institutions primarily engaged in the care of the sick, aged, mentally ill, or disabled who reside on the premises;· schools for children who are mentally or physically disabled or gifted;· preschools, elementary and secondary schools, and institutions of higher education;· and Federal, state, and local government agencies.Employees of firms that do not meet the $500,000.00.00 annual dollar volume threshold may be covered in any workweek when they are individually engaged in interstate commerce, the production of goods for interstate commerce, or an activity that is closely related and directly essential to the production of such goods.In addition, the Act covers domestic service employees, such as housekeepers, cooks, gardeners, nurses, or home health aides, if they receive at least $1,900 in 2015 from one employer in a calendar year, or if they work a total of more than eight hours a week for one or more employers. (This calendar year wage threshold is set by the Social Security Administration each year.) For additional coverage information, see the Wage and Hour Division Fact Sheet #14: Coverage under the FLSA.The Act exempts some employees from its overtime pay and minimum wage provisions, and it also exempts certain employees from the overtime pay provisions only. Because the exemptions are narrowly defined, employers should check the exact terms and conditions for any applicable exemption by contacting their local Wage and Hour Division office.