If You're Not Getting Paid Overtime, Are You Owed a Ton of Money?

 

 Man carrying documents I came across this interesting article that, once again, brings up the overtime issue for paralegals.  This issue is so old and so ongoing, I am sure we'll be telling our great-grandchildren about it.

Whether you want to be paid overtime or not, the Labor Department ruled several times over the years, actually, and again in 2006 that paralegals are non-exempt, meaning you are supposed to get paid overtime.

While there are some paralegals who argue that they prefer to have a professional status, I do not know of any paralegal who, once they were getting an additional $300 a week or $1200 a month in salary beyond their base compensation, said, "You know, forget all this.  I want to be called a professional. Take the money away, keep me working 60 hours a week, give me a professional status and reduce my income by 20%." 

For all intents and purposes, the legal community recognizes paralegals already as professionals.  One indicator is to whom the paralegal reports on the organizational chart.  Paralegals are on the attorney side of the chart while secretaries are on the HR or Office Administrator side.

Here is the article as found in the Connecticut Law Review:

Lawyer As Employer: Who In Your Office Is

Entitled To Overtime? 

                          
|                                     T
hose paralegals might not really be exempt employees.

 By ROBERT G. BRODY and SAMI ASAAD

 

In our last article, we provided a self-audit for lawyers to assess their proficiency as employers. The next two articles cover many of the pay-related issues common to law firms. We begin with an overview of federal and state overtime requirements, including relevant exemptions, plus an analysis of one hard-to-classify employee: the paralegal.

As you probably know, the Fair Labor Standards Act (FLSA) and Connecticut’s wage and hour laws require most employees (called “non-exempt”) to receive minimum wage plus overtime at time-and-a-half for all hours worked each week over 40.

Also, employers must maintain records of all hours worked by non-exempt employees. “Exempt” employees are exempt from those requirements. In a law firm, where 9-5 hours are not the norm, it is important to know who is exempt and who is not, especially with rising wage and hour investigations and class actions.

Exemptions

While several exemptions exist under the FLSA and Connecticut statutes, the ones most relevant to law firms are the “executive,” “administrative,” and “learned professional.” As lawyers, we know words have different meaning in the law than in everyday life. So you should not be surprised that under the FLSA, your firm’s “administrative professionals” (i.e., secretaries) are likely neither “administrative” nor “professional” employees. Qualifying as exempt requires passing two tests: the salary test and the primary duties test.

The salary test is usually straightforward: exempt employees in Connecticut must receive a minimum salary of $475 per week. As a salary, it must be paid regardless of the number of hours worked and may be subject to only a few statutorily permitted deductions (e.g., full-day absences for reasons other than sickness or accident).

The primary duties test requires careful analysis and is where many employers make mistakes. To qualify as exempt from overtime, employees’ duties must match those in the statutory definition of “executive,” “administrative,” or “learned professional.”

In general terms (there are extensive regulations), executive employees primarily manage the business, and regularly direct the work of two or more employees. Administrative employees perform office work directly related to management policies or general business operations of their employer and regularly exercise discretion and independent judgment. Learned professionals primarily perform work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction and study. Lawyers performing lawyer work are a classic example of learned professionals.

What About Paralegals?

Consider a paralegal with a two-year legal studies degree and eight years of experience in legal research and analysis. Ninety percent of the paralegal’s time is spent analyzing facts, identifying the legal issues involved, and then providing an interpretation of the law in memorandum format for attorneys to review. Although attorneys suggest deadlines, the paralegal works very independently.

Ten percent of the paralegal’s time is spent reviewing new materials, analyzing costs of current resources used in the department, drafting plans for cost savings for the department, training various personnel on the use of legal resources and legal research in general, and performing other miscellaneous tasks. Exempt? According to a 2006 opinion letter by the U.S. Department of Labor, the answer is no.

The Labor Department first evaluated whether the administrative exemption applied and found the work was not “directly related to the management policies or general business operations” of the firm. Examples of qualifying work include tax, accounting, auditing, and human resources activities. Thus, administrative work is different from the “production” work of the business. Since what the paralegal did was part of the firm’s “product,” it did not qualify as administrative.

Also, there was no discretion in “matters of significance” such as the formulation, interpretation, or implementation of management policies or operating practices. The Labor Department stated, “It has long been the position of the [department] that the duties of paralegal employees and legal assistants generally do not involve the exercise of discretion and independent judgment of the type required by the administrative exemption.”

Are Paralegals ‘Professionals?’

Citing a specific regulation on paralegals, the Labor Department found the learned professional exemption generally does not apply because although many paralegals have four-year degrees, “an advanced specialized academic degree is not a standard prerequisite for entry into the field.”

One bit of good news is paralegals with “advanced specialized degrees in other professional fields [e.g., law, science, or medicine] and [who] apply advanced knowledge in that field in the performance of their duties” may qualify as learned professionals. The regulation provides as an example an engineer/paralegal providing “expert advice on product liability cases or to assist on patent matters.”

Incidentally, although this did not come up in the opinion letter, paralegals might meet the executive exemption if they are supervisors (supervising at least two employees) and spend the majority of their time doing this.

Conclusion

If you just realized your 60-hours-a-week paralegal is non-exempt, you’re probably wondering what to do. Employers in similar situations have used several approaches, but suffice it to say, this must be handled delicately.

In close cases, minor changes in duties may satisfy an exemption. However it is likely the paralegal will need to be reclassified. In that case, how you communicate the change can help minimize exposure.

Also remember not to create a “smoking gun” by documenting possible violations. Consider working with employment counsel to develop the best strategy for your specific circumstances. •

Robert G. Brody is the founder of Brody and Associates LLC, and Sami Asaad is an associate with the Firm. Brody and Associates represents management in employment and labor law matters and has offices in Westport and New York City.
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