Volume 19, Number 1
January/February 2002

Paralegal Overtime

Yes, No, or Maybe?

By Xavier Rodriguez

Many employers (corporate and law firms alike) have concluded that their legal assistants are exempt from the overtime provisions of the Fair Labor Standards Act (FLSA). In a national survey, Legal Assistant Today magazine reported that a majority of respondents were characterized as "exempt" by their respective employers.1

Indeed, a number of legal assistants would prefer the "exempt" designation to help bolster their professional status or to allow them to participate in trial or other activities without employer concerns regarding overtime. However, many paralegals have valid concerns regarding the number of hours they work without sufficient compensation. The majority of legal assistants hold either an associate, bachelor’s, or master’s degree. The average Texas legal assistant earns about $37,000. Many legal assistants possess a paralegal certificate or a certified legal assistant designation. Relying on paralegals for certain tasks saves clients money and frees lawyers to spend their time on strategy, research, and writing.

Exemptions provided under the FLSA are narrowly construed in accordance with the technical definitions given for them in the act. This article reviews these exemptions, as well as recent Department of Labor (DOL) Wage & Hour Opinion Letters.

Fair Labor Standards Act

The FLSA was enacted in 1938. It is enforced by the DOL and regulates minimum wage and overtime pay for hours worked in excess of 40 hours per week in the private and public sectors. Regulations provide for exemptions from the overtime provisions in three categories: executive, administrative, and professional.

Executive exemption. An employee qualifies for an executive exemption if the employee receives a salary of at least $250 per week or if the employee’s primary duty is management of an enterprise or a department, including supervision of at least two other employees.2 This exemption could apply to a supervising legal assistant if the "primary duty" criterion is met; i.e., if he or she regularly directs two or more employees. (However, if the employees are other legal assistants, a lawyer may be violating the General Guidelines for the Utilization of Legal Assistants, which states that the lawyer must direct and supervise all legal assistants under his or her charge and must not delegate that responsibility to a supervising legal assistant.) To prove supervisory status, an employer must demonstrate that more than 50 percent of the legal assistant’s time is spent managing a recognized department or subdivision.3

Administrative exemption. An administrative exemption is valid if the employee receives a salary of at least $250 per week or if the employee’s primary duty consists of office or non-manual work directly related to management policies or general business operations of the employer or its customers. The employee also must customarily and regularly exercise discretion and independent judgment.4

The DOL agrees to the executive exemption if the circumstances fit the criteria, but they generally refuse to recognize the administrative exemption for legal assistants.

From its first private letter ruling in 1977, the DOL has consistently maintained that legal assistants are not exempt unless they qualify under the administrative exemption. The department has repeated the same language in letter after letter:

It is our further position that "legal assistants" and "paralegals" generally are not involved in the performance of duties requiring the exercise of discretion and independent judgment of the type required by section 541.2; they are, instead, involved in the use of skills rather than discretion and independent judgment. In our view, such employees generally are found to be highly trained and highly skilled specialists who, as such, would not qualify for the exemption as defined . . . in Regulations, Part 541.5

In its most recent opinions on this subject,6 the DOL reiterated that traditional legal assistant duties such as preparing oral presentations or meeting and interviewing clients do not involve the exercise of discretion and independent judgment. The DOL interprets "discretion and independent judgment" to mean "the authority or power to make an independent choice, free from immediate direction or supervision with respect to matters of significance." Further, although certain tasks

involve some judgment as to source material to be researched, steps to be taken, parties to be contacted, and the like, such work does not involve the exercise of discretion and independent judgment at a level contemplated by 29 C.F.R. Part 541.... These duties involve the use of skills and procedures.

Finally, the DOL noted that because most jurisdictions have strict prohibitions against the unauthorized practice of law by lay persons, delegating legal tasks to a lay person is proper

only if the lawyer maintains a direct relationship with the client, supervises the delegated work and has complete professional responsibility for the work produced. The implication of such strictures is that [a legal assistant] would probably not have the amount of authority to exercise independent judgments with regard to legal matters necessary to bring them within the administrative exemption.

Professional exemption. An employee qualifies for a professional exemption if he or she receives a salary of at least $250 per week or if his or her primary duty consists of work requiring advanced knowledge in a field of science or learning, including work requiring consistent exercise of discretion and judgment or work requiring expertise in a recognized field of artistic endeavor.7

The DOL states that 29 C.F.R. 541.3(a)(1) requires a professional employee to perform work that requires "knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of study." A prolonged course of study means

at least a baccalaureate degree or its equivalent, which includes a longer intellectual discipline in a particular course of study as distinguished from a general academic course otherwise required for a baccalaureate degree. It is our general position that although legal assistants may have special training in their field, their duties do not require knowledge of an advanced type in a field of science or learning within the meaning of section 541.301 of the regulations.8

It should be noted that the California Division of the Labor Standards Enforcement departs radically from the DOL’s position, deciding in 1992 that an ABA-approved course of study for legal assistants does meet the educational criteria of the professional exemption. In Oxman v. Hamilton & Samuels, the agency held that Hamilton & Samuels’s legal assistants were professionally exempt: They met the duties test, were cost-effective replacements for associates, and were required to have a certificate from an ABA-approved paralegal program. The paralegals were a distinct group within the firm, with authority to delegate work to the firm’s secretaries and clerks. Additionally, the Division found that the firm’s clients willingly paid substantial hourly rates ($100 an hour or more) for paralegals’ independent judgment and discretion but would no doubt resist such rates for clerical work.

Time for Review by the DOL and Employer

Obviously, not all legal assistants should be exempt. The determination should be based on the individual’s duties and responsibilities and the degree of discretion and independent judgment exercised. It is well established that an employee’s exemption under the act is purely a question of fact to be determined on a case-by-case basis.9 However, the employer always carries the burden of proving the exemption.10 An employer’s claim of exemption must be narrowly construed and in favor of the employee.11

Indeed, some courts have held that an employer’s burden in proving an FLSA exemption is "heightened beyond the usual preponderance standard, such that the employer must show that the employee fits plainly and unmistakably within the exemption’s terms."12 Incorrectly exempting a legal assistant from overtime pay can be costly—either the DOL or an affected employee can sue to recover unpaid overtime compensation wages. Determining the amount of unpaid overtime compensation is often problematic because of the failure to maintain adequate records of total hours (not just billable hours) worked each day and week. If an employer "willfully" violates the act, the statute of limitations is extended from two to three years. An employer may also be liable for liquidated damages, civil penalties, and possibly criminal penalties.

The DOL has been criticized in the past for its position regarding legal assistants. Proponents of an exempted status argue that the basis for a final determination should rest on something more current than recycled letter rulings from 1977.13 They believe the decision should encompass current practice and utilization, recognized status of the profession, advanced education, continuing legal education, substantive duties, and the legal assistant’s degree of exercising discretion and independent judgment.

Supporters of this position received a favorable jury verdict in Reich v. Page & Addison.14 Page & Addison’s legal assistants were found to be exempt from FLSA overtime requirements on the basis of the administrative exemption. Nevertheless, employers should recognize that the DOL’s position does not merely unfairly scrutinize legal assistants but also reflects a long-standing policy to narrowly construe exemptions.15 Legal assistants who are graduates of an accredited legal assistant program, handle substantive matters, exercise discretion and independent judgment, and attend CLE programs have a better chance at being construed as exempt employees than others who may also be called "legal assistants" or "paralegals." The Fifth Circuit recently disagreed with the DOL’s narrow interpretation of the regulations.16

In the absence of clear facts, the cautious employer should not exempt a legal assistant from overtime pay. However, an employer might consider paying an employee who regularly exceeds 40 hours a week a fixed weekly salary based on a fluctuating workweek. Such a proposal requires a clear, mutual understanding of the compensation agreement. Further, the agreement does not obliterate the necessity of paying for overtime but merely changes how such a calculation is made.17

Notes

1. 56.1 percent of the respondents were considered exempt versus 43.9 percent; Legal Assistant Today, Jan./Feb. 1999.

2. 29 C.F.R. § 541.1 (1999).

3. See Wage & Hour Op. Letter, 99-02 CCH WH ¶ 32,728 (Feb. 19, 1998) (senior legal assistant not exempt as executive because of insufficient information to determine if primary duty criterion was met).

4. 29 C.F.R. § 541.2 (1999).

5. See Wage & Hour Op. Letters, Feb. 10, 1978; Aug. 17, 1979; Sept. 27, 1979; April 23, 1984; June 12, 1984; Aug. 18, 1986; April 13, 1995; Nov. 9, 1997; and February 19, 1998.

6. See Wage & Hour Op. Letters, 1998 WL 852667 (Mar. 20, 1998); 1998 WL 852701, 1998 WL 852691 (Feb. 19, 1998).

7. 29 C.F.R. § 541.3 (1999).

8. See Wage & Hour Op. Letter, 1998 WL 852701 (Feb. 19, 1998).

9. Zacek v. Automated Sys. Corp., 541 S.W.2d 516, 518 (Tex. Civ. App. Houston 14th Dist. 1976) (citing Walling v. General Indus. Co., 330 U.S. 545 (1947)).

10. Paul v. Petroleum Equip. Tools Co., 708 F.2d 168 (5th Cir. 1983).

11. Brennan v. Greene’s Propane Gas Serv., Inc., 479 F.2d 1027 (5th Cir. 1973).

12. Hagadorn v. M.F. Smith & Assocs., Inc., 172 F.3d 878 (10th Cir. 1999) (citing Arnold v. Ben Kanowsky, Inc., 361 U.S. 388 (1960)).

13. Richard T. Cassidy & Jan L. Browning, Paralegal Overtime: Yes, No, or Maybe?, 57 Tex. B.J. 32 (1994). But see Owsley v. San Antonio Indep. Sch. Dist., 187 F.3d 521, 525 (5th Cir. 1999) (such opinion letters are not meant to be disregarded: "although less authoritative than regulations or formal decisions, [opinion letters] are entitled to be weighed carefully and to great difference if they state a reasonable conclusion").

14. Cause No. 3:91-CV-2655-P, U.S. Dist. Ct., N. Dist. Tex., Dallas Div. (Mar. 10, 1994).

15. See Wage & Hour Op. Letter No. 1902, 99-02 CCH WH ¶ 32, 731 (Feb. 19, 1998) (medical assistant not exempt); Wage & Hour Op. Letter No. 1918, 99-02 CCH WH ¶ 32,747 (Apr. 17, 1998) (investigator not exempt).

16. See Owsley v. San Antonio I.S.D., 187 F.3d 521 (5th Cir. 1999) (athletic trainers who attend practices and events, maintain treatment facilities, and work with students fall within the professional exemption).

17. See 29 C.F.R. § 778.114 (1999).

 

Justice Xavier Rodriguez is currently a member of the Supreme Court of Texas. He authored this article prior to his appointment to the bench in September 2001, and the opinions expressed herein are not considered to be legal advice or a statement of the judicial position of Justice Rodriguez. Prior to his recent appointment, he was a partner in the law firm of Fulbright & Jaworski L.L.P in San Antonio.

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