YourABA: June 2013
YourABA October 2013 Masthead

The basics on FLSA for law firms

One might expect that employment law compliance would be a guarantee in a law firm. But even the best have unwittingly fallen victim to the complexities and nuances of the Fair Labor Standards Act, said Mike Pierro of Allen Norton & Blue PA in Tampa, Fla. The longtime labor and employment attorney explained the FLSA’s general requirements for law firms as well as some common compliance mistakes in an American Bar Association Sound Advice podcast.

Only employers with covered employees are subject to the FLSA’s requirements, Pierro said. If an employer has two or more employees and grosses at least $500,000 per year, it should assume that it is covered by the FLSA. This is known as enterprise coverage.

"Even if an employer does not qualify as a covered enterprise in that it doesn’t gross at least $500,000 annually, it may nonetheless have individually covered employees if the employees engage in interstate commerce or are involved in the production of goods in interstate commerce," Pierro said.

Under the FLSA, employees who are not otherwise exempt are entitled to an hourly wage rate of not less than the federal minimum wage, he said. Nonexempt employees are also entitled to overtime compensation, which is generally one and a half times an employee’s regular hourly rate of pay for each hour worked in excess of 40 hours in a workweek.

Employers often mistakenly assume that nonexempt workers cannot be paid a salary and must be paid hourly, Pierro said. "A nonexempt employee can be paid on a salary basis, however, such an employee must still be paid overtime to the extent that he or she worked over 40 hours in a workweek," he said.

Pierro outlined some other common pitfalls regarding the compensation of nonexempt employees, such as giving them compensatory time off in lieu of paying overtime. Another common mistake occurs when dealing with employees who work unauthorized overtime.

"It must be understood that employers must still pay the offending employees for the unauthorized overtime once the hours have been worked," Pierro said. "However, employers may discipline such employees for violating written and unwritten policies against unauthorized overtime."

An additional pitfall concerns nonexempt employee breaks and lunch periods. "The FLSA does not require that employers provide their employees rest periods and lunch breaks," Pierro said. "When employers do provide such breaks, they must compensate workers for any break periods lasting 20 minutes or less. However, the employee must be completely relieved of duty during the lunch period. If the employee is required to work while eating or is routinely interrupted to resume work, the time must be compensated."

The FLSA does prescribe exemptions from its minimum wage and overtime compensation requirements, Pierro said. The most common exemptions applied in a law practice are known as white-collar exemptions. White-collar exemptions include, in part, the executive, administrative and professional exemptions.

"As an initial matter, to fit into any one of these exemptions, an employee must be paid a weekly salary of no less than $455," Pierro said. "The employer cannot dock the employee’s pay for partial-day absences and cannot deduct for full-day absences occasioned by illness. This is known as the salary basis test. If the salary basis test is not satisfied, the claimed exemption will be lost and the employee will be subject to the FLSA’s minimum wage and overtime compensation requirements."

In addition to meeting the salary basis test, each exemption has a job duties test that must also be satisfied. To meet the job duties test, Pierro said, an employee must regularly direct the work of at least two full-time employees, and the employee must have the authority to hire or fire other employees or have significant input on such matters. The employee’s primary duty must also include the exercise of discretion and judgment with respect to matters of significance.

A common mistake law firms make is to improperly classify paralegals as exempt professional employees, Pierro said. "Paralegals generally do not fall within this exemption because they do not have advanced knowledge acquired by a prolonged course of specialized intellectual instruction," he said. "Furthermore, paralegals do not consistently exercise discretion and judgment given that their work is at the discretion of and subject to the final approval of a supervising attorney."

Sound Advice is sponsored by the ABA Section of Litigation.

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