I'll preface this by stating clearly that while I am very familiar with this area of the law--I have over 15 years of experience handling HR issues--I am NOT an attorney. You would do well to consult one with regard to this and any other question on employment law. With that said, this is not like deciding on a paint color for your offices--you are required to comply with federal law.

Employee classification is governed by the Fair Labor Standards Act (FLSA), and failure to properly classify employees is one of the more frequent violations of employment law. The Labor Department's proposed budget is a sizeable increase over last year's budget, and most of that money is earmarked for enforcement--so disregard at your own risk.

Under the FLSA, employees are classified based upon the actual work they perform--not their job title, or even their job description--rather, their actual duties. Generally speaking, supervisors, managers, executives, function leaders, and other individuals who function independent of general supervision and whose primary contributions are intellectual rather than tactical are classified as Exempt (salaried) employees. All others generally fall into the Non-exempt (hourly) category. Of course, it can be a little more complicated depending on the specifics of each situation, but following those general guidelines should keep you in compliance with the law.

I would be happy to provide more specific guidance if you would be interested in setting up a call.