Free Payroll Tool
See what your payroll provider really charges
Most providers hide per-run and add-on fees. Audit your real cost per employee in about 30 seconds, free.
Run the Payroll Fee Auditor →Blog · Payroll Management · Law Firm
Law Firms: Employee Classification for Payroll (2026)
Employee classification in law firms is two questions: whether attorneys and paralegals are employees or contractors, and whether the employees are exempt from overtime. BEG runs law firm payroll for $45 per employee per month inside the payroll software you already use, all-inclusive, live in 3 to 5 business days.
Employee or contractor: how law firms get it wrong
An employee who holds a valid license to practice law and is actually engaged in that practice is an exempt professional, and the salary requirements of 29 CFR 541 subpart G do not apply. The exemption turns on the license and actual practice, not on how the lawyer is paid.
Workers paid on a Form 1099, including contract attorneys and freelance paralegals, are not necessarily independent contractors under the FLSA; status depends on the economic reality of the relationship, not the label, the form, or a signed contractor agreement.
Exempt or non-exempt
Employees holding a valid license to practice law who actually practice are exempt professionals, and the salary level and salary basis tests do not apply to them. Job titles alone do not determine exemption status; duties and pay must meet the regulations.
The salary floor for the executive, administrative and professional exemptions is $684 a week, restored to the 2019 level after the 2024 rule was vacated. Paralegals and legal assistants at the May 2025 national median of $62,890 a year clear that salary test, so the duties test decides.
What misclassification costs
Partners are not employees and should not be issued a Form W-2 for distributions or guaranteed payments from the partnership. Those amounts are reported to the partner on Schedule K-1 of Form 1065.
Reclassifying a contractor as an employee means back FICA at 15.3 percent split between the parties, back FUTA, penalties and interest, and often back overtime under the FLSA at time and one half for two or three years.
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- An employee who holds a valid license to practice law and is actually engaged in that practice is an exempt professional, and the salary requirements of 29 CFR 541 subpart G do not apply. The exemption turns on the license and actual practice, not on how the lawyer is paid. [29 CFR 541.304]
- Workers paid on a Form 1099, including contract attorneys and freelance paralegals, are not necessarily independent contractors under the FLSA; status depends on the economic reality of the relationship, not the label, the form, or a signed contractor agreement. [DOL Fact Sheet #13]
- Employees holding a valid license to practice law who actually practice are exempt professionals, and the salary level and salary basis tests do not apply to them. Job titles alone do not determine exemption status; duties and pay must meet the regulations. [DOL Fact Sheet #17D]
- Partners are not employees and should not be issued a Form W-2 for distributions or guaranteed payments from the partnership. Those amounts are reported to the partner on Schedule K-1 of Form 1065. [IRS Paying yourself]
Read the full guide to the employee versus contractor test, and the rest of the law firm payroll library.
Managed Payroll, Handled.
BEG manages payroll at $45 per employee per month, all-inclusive. Get an instant cost comparison for your business.
Frequently Asked Questions
Are attorneys in a law firm employees or contractors?
An employee who holds a valid license to practice law and is actually engaged in that practice is an exempt professional, and the salary requirements of 29 CFR 541 subpart G do not apply. The exemption turns on the license and actual practice, not on how the lawyer is paid.
What does the second test look at?
Workers paid on a Form 1099, including contract attorneys and freelance paralegals, are not necessarily independent contractors under the FLSA; status depends on the economic reality of the relationship, not the label, the form, or a signed contractor agreement.
Which law firm employees can be exempt from overtime?
Employees holding a valid license to practice law who actually practice are exempt professionals, and the salary level and salary basis tests do not apply to them. Job titles alone do not determine exemption status; duties and pay must meet the regulations.
What does managed payroll cost for a law firm?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. Billable hours tracking, partner draw vs. salary and attorney bonus structures are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Law Firms. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: IRS: Independent Contractor or Employee
From the blog