GPSolo January/February 2007
The Lawyer as Employer: Why Do They Keep Changing the Rules?
I like baseball. For the most part, the rules of the game have remained the same for years, with only minor changes. If Lou Gehrig were to attend a ball game today, he would understand well what was going on.
The same cannot be said for the practice of law in a small firm. Clarence Darrow would be completely mystified by how small firms are run—especially in the area of dealing with employees.
But you don’t have to go as far back as Darrow to note a significant contrast. Managing employees at a small firm is quite different than it was even 15 years ago. The rules relating to employees seem to keep changing. Are there any “suggestions for success” for the solo or small practice lawyer who wants to do well in handling employee issues? I think there are.
The New Rules about Sexual Harassment
The rules concerning sexual harassment have changed, and the solo/small firm practitioner had better be alert. The bottom line here is, don’t engage in it, don’t tolerate it, don’t wink at it.
One possible scenario: A female secretary in your firm confronts you to complain that one of your partners is engaging in “inappropriate touching”; she requests that the behavior be stopped. Your partner admits he’d been “fooling around” with her, but it was consensual. A short time later, it becomes obvious that the secretary is not doing her job well and the decision is made to terminate her. After termination, she hires a lawyer who threatens suit for sexual harassment, wrongful termination, and “sexual battery.” Do you fight? Do you settle? Does the partner contribute more to a settlement? Do you think this is something that will never happen in a small, closely knit firm like yours? Don’t count on it.
Sexual harassment was recognized as a form of sexual discrimination in the 1986 Supreme Court decision Meritor Savings Bank v. Vinson. Since then we have walked a long and winding road toward militant intolerance of sexual misbehavior in the workplace. The practical effect of this increased vigilance requires us to walk a very circumspect line in our behavior at work.
Small firms tend to be more like family, and employees often have a close working relationship. But small firms must be just as concerned about preventing sexual harassment as large firms—the reputation of the firm and lawyer is at stake, even if a lawsuit is never filed. In addition, lowered productivity and financial loss may result when inappropriate sexual behavior is permitted.
Here are a few suggestions for avoiding sexual harassment in the workplace:
1. Consider writing a short sexual harassment policy that is understandable and circulated to all employees. Most small firms have no written policy prohibiting sexual harassment. Most of us assume everyone should know the limits of proper conduct. Unfortunately, this is seldom the case.
2. Be sure the policy is expressed in plain language. Every employee in your office must be able to understand it. Be sure employees receive a copy and read it. Be realistic in creating a “user friendly” complaint process. Even the best policy will be ineffective if victims of harassment feel uncertain or inhibited about the complaint process. Harassment matters are difficult to talk about, and therefore the complaint network must be non-threatening.
3. Be prompt in investigating complaints of sexual harassment. In a small office, care should be taken to question all persons with relevant knowledge, document the investigation, arrive at a conclusion, and take appropriate action.
4. Beware of consensual relationships. Perhaps the most troublesome sexual harassment situation occurs in the context of a consensual romantic relationship. Often victims of harassment have been romantically involved with their alleged harasser. When the relationship goes sour, a sexual harassment complaint follows. You may want to consider prohibiting consensual relationships between supervisors and their subordinates.
5. Once a matter has been investigated, a meeting with the parties should be conducted. The sexual harassment policy should be re-emphasized with both parties and appropriate discipline given. If something less than termination is in order, consideration must be given to whether the two employees can continue working together. Delicate diplomacy is often required and may be especially problematic in small companies. Creative solutions are called for, and the impact on all employees must be considered. Document the actions taken, communicate the results, and put the matter to rest as quickly as possible.
6.Be diligent in stopping the kind of behavior that may indicate sexual harassment in your employees:
- suggestive remarks
- teasing of a sexual nature
- unwelcome physical conduct or sexual advances
- continual use of offensive language
- sexual bantering
- bragging about sexual prowess
- suggestive pictures or cartoons
- “compliments” with sexual overtones
When it comes to sexual conduct, the general rules of society do not apply. Impose a stricter standard on yourself than you see displayed in other arenas of life and you will go a long way toward avoiding sexual harassment complaints and the damage that results.
The New Rules about Overtime
A second topic about which small law firms should be diligent is the “white collar” overtime exemption for legal assistants. The rules concerning payment of overtime have changed, and the solo/small firm practitioner had better be aware. The bottom line here is, consider everyone to be entitled to overtime unless you can safely and objectively classify them as “exempt” (i.e., not entitled to overtime).
On April 23, 2004, the U.S. Department of Labor published its final rules outlining the highly anticipated revisions to the executive, administrative, and professional exemptions (“white collar” exemptions) of the Fair Labor Standards Act. To prohibit unanticipated claims for overtime wages based on Department of Labor regulations, solo/small firm practitioners should evaluate the compensation package and job function of their legal assistants.
Although the Labor Department’s traditional position is that legal assistants are entitled to overtime, nearly one-half of the legal assistants in the United States were designated by their employer as exempt from the overtime requirement of the FLSA. In order to accurately evaluate the exempt or non-exempt status of their legal assistants, employers must understand the basic overtime requirement of the Fair Labor Standards Act and the revisions to the white-collar exemptions.
The FLSA applies to any individual employee whose work regularly involves them in commerce between states. Thus, nearly all employees are covered by the FLSA.
The basic overtime requirement of the FLSA entitles non-exempt employees to receive overtime pay at a rate of time-and-one-half for hours worked in excess of 40 hours per week. Three categories of employees are exempt—executive, administrative, and professional—and these are often assumed by legal employers to encompass legal assistants.
The U.S. Department of Labor has developed several tests that focus on compensation and job duties to define these exemptions. The tests for each exemption are essentially composed of three components: salary basis, salary level, and duties performed.
Salary basis. To be deemed exempt, an employee must be paid on a salary basis. An employee is considered to be paid on a salary basis when the employee is paid a predetermined amount of compensation on a weekly or less frequent basis that is not subject to reduction because of variations in the quality or quantity of the work performed.
Salary level. The Department of Labor regulations specify a minimum salary level in order to classify an employee as exempt. The current minimum is an annual salary of $23,660. Therefore, if your assistant is paid a salary of less than the minimum, he or she is entitled to overtime.
Duties performed. The term "primary duty" is central to the “duties tests” for each of the exemptions. The employee’s primary duty must be the performance of exempt work and is based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole.
Factors to consider when determining the primary duty of an employee may include: the relative importance of the exempt duties as compared with other types of duties; the amount of time spent performing exempt work; the employee’s relative freedom from direct supervision; and the relationship between the employee’s salary and the wages paid to other employees for the kind of non-exempt work performed by the employee.
The primary duty component is described differently for each of the three categories of “executive,” “administrative,” and “professional.”
Executive primary duty. The duties component of the executive exemption is satisfied for an employee if the primary duty is management focused, if the employee regularly directs the work of two or more employees, and if the employee has the authority to hire or fire other employees. Most legal assistants do not satisfy the executive exemption owing to the second prong of the test. The ultimate responsibility of “directing” the work of legal assistants will most likely lie with the supervising attorney, rather than with a managing legal assistant. In my home state of Oklahoma, the argument that a legal assistant is exempt by the primary duties of “directing” may run afoul of the Oklahoma Rules of Professional Conduct, which dictate that lawyers must supervise the work of their legal assistants.
Administrative primary duty. To meet the requirement, the employee’s primary duty must be performance of work directly related to the management or general business operations of the employer or the employer’s customers, and includes the
exercise of discretion and independent judgment with respect to matters of significance. Although the Department of Labor has regularly taken the position that the duties of legal assistants do not involve the exercise of discretion and independent judgment, the administrative exemption is the one most applicable to legal assistants.
The Federal Regulations identify several factors relative to determining whether an employee exercises discretion and independent judgment with respect to matters of significance. The factors are whether the employee:
- has authority to formulate, affect, interpret, or implement management policies or operating practices;
- carries out major assignments in conducting the operations of the business;
- performs work that affects business operations to a substantial degree;
- has authority to commit the employer in matters that have significant financial impact;
- has authority to waive or deviate from established policies and procedures without prior approval;
- has authority to negotiate and bind the company on significant matters;
- provides consultation or expert advice to management;
- investigates and resolves matters of significance on behalf of management; and
- represents the company in handling complaints, arbitrating disputes, or resolving grievances.
Many legal assistants may perform duties consistent with these factors, as illustrated in Reich v. Page and Addison, a case filed in the Northern District of Texas federal court by the U.S. Department of Labor. In Reich, a Dallas law firm successfully defended the assertion by the Department of Labor that the firm’s employees were non-exempt by convincing a jury that their legal assistants fell within the administrative exemption of the FLSA.
The legal assistants in that firm were found to exercise the requisite discretion and judgment to qualify as exempt. The Department of Labor has issued opinion letters evaluating the status of legal assistants and has continually maintained that most assistants are not exempt and must be paid overtime. The exemptions are determined on a case-by-case basis.
Professional primary duty. An employee meets the duties component of the professional exemption when the employee has a primary duty involving work that requires advanced knowledge “in a field of science or learning customarily acquired by a prolonged course of specialized instruction” or requires “invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.”
The FLSA regulations directly address the status of legal assistants and paralegals, stating that paralegals and legal assistants do not qualify for the learned professional exemption. In an opinion letter dated January 7, 2005, the Department of Labor confirmed this assertion by establishing that “there was no evidence in the record that a four-year specialized paralegal degree is a standard prerequisite for entry into the occupation,” thus excluding paralegals from the primary duty definition requiring a “prolonged course of specialized instruction.”
The analysis is a challenging one for legal employers when determining whether to pay a legal assistant overtime. It may be that both exempt and non-exempt legal assistants work in the same office, depending on the job responsibilities of each. The practical application of the rules requires the employer to look at every legal assistant’s job duties and make a decision regarding the employees of the firm.
What should you do? Either the U.S. Department of Labor or an affected employee can sue to recover unpaid overtime on the basis of misclassification. The liability of the employer is for the amount of unpaid compensation and perhaps an equal amount of liquidated damages. Attorney fees, costs of the action, and a civil penalty for repeated violations may also be assessed. It is the employer who bears the burden of proving the exemption is applicable. Given the complex analysis, the employer’s burden to establish an exemption, and the penalties resulting from erroneous exemption classification, legal employers should follow these precautionary measures:
1. Determine if the legal assistant is paid on a salary basis. An employee must be compensated on a salary basis and suffer no reduction in pay because of quality or quantity of work in order to be considered exempt.
2. Determine if the legal assistant earns less than $23,660. Employees earning a salary under $23,660 are always non-exempt.
3.Perform job evaluations. Carefully assess the duties and responsibilities performed by each legal assistant, giving special attention to duties that significantly impact firm business and require discretion and independent judgment.
4.Write or revise job descriptions. The job description should accurately reflect the duties required and the work performed and should be clear and explicit, especially where legal assistant duties substantially impact firm business and require discretion and independent judgment.
5. Update payroll status. Ensure that the exempt/non-exempt status of a legal assistant is accurately documented in payroll records so that the appropriate overtime payment will be paid where necessary.
6. Address the status issue. Meet with a legal assistant for whom a status change has been made to emphasize the employee’s value to the firm and ensure that the legal assistant does not equate the reclassification with a demotion.
7.Ask for help. If you are uncertain how to classify your employees, seek professional guidance from a human resource consultant or an employment law attorney.
Attorneys practicing law by themselves or in small firms face the usual challenges associated with a law practice, compounded by the administrative challenges of running a business and dealing with employees. Don’t succumb to the temptation to ignore employee problems brewing in your office. The time, money, and reputation you’ll save—not to mention the long-term problems you’ll avoid—by properly addressing employee problems are worth the effort.
Jim T. Priest practices employment law and is a partner with Whitten, Nelson, McGuire, Terry & Roselius in Oklahoma City, Oklahoma. He can be reached at firstname.lastname@example.org. This article originally appeared as a presentation at the 2005 Oklahoma Bar Association Solo and Small Firm Conference, © 2005 Jim T. Priest. Reprinted by permission.