United States: Paralegals Status Under New DOL Overtime Regulations

On March 28, 2003, the U. S. Department of Labor (DOL) asked for public comment on its proposed rule changes to the Fair Labor Standards Act of 1938 (FLSA). These changes would potentially affect a significant number of people. DOL documentation under occupation code 234 (legal assistants) shows 144,284 hourly and 210,917 salaried positions, for a total of 355,201 paralegals impacted by the rules changes. It would seem logical to presume there would be much interest in, and comments on, these proposed new regulations. However, that was not the case.

During the comment period 75,280 comments were received. Of these, over 90% were form letters generated by AFL-CIO affiliates expressing general opposition. This left approximately 600 substantive comments, with only a handful from individual paralegals, paralegal groups and associations. At the national level, The National Association of Legal Assistants (NALA) did not submit comments, while the Federation of Paralegal Associations, Inc. (NFPA) did. Most statewide associations did not submit comments. Thus, final changes to DOL regulations were made with no input from the majority of paralegals.

On April 20, 2004, after fierce political controversy and vigorous debate in the U.S. Congress and the media, the DOL announced its final regulations governing overtime eligibility for "white collar" workers pursuant to the FLSA. The full text of these regulations was published on April 23, 2004 in the Federal Register and a complete copy may be found at the DOL’s website: http://www.access.gpo.gov/su_docs/fedreg/a040423c.html under Wage and Hour Division. The DOL also unveiled a new website, titled "FairPay" (found at www.dol.gov/esa/regs/compliance/whd/fairpay/main.htm) to help explain the changes.

Under the new regulations the FLSA’s "white collar" exemption rule increases the salary floor under which employees must be paid overtime. Those earning $455 per week (the equivalent of $23,660 per year) or less are now automatically entitled to time-and-a-half pay for any hours worked over 40 hours per week.

In addition, Section 541.601 in the final regulations states:

Therefore, employees who earn at least $100,000 annually may be exempt and not entitled to overtime pay. There are, however, additional tests that may be applied to determine actual status.

One controversial area in the old exemption regulations was the "duties test." In the new rules the "duties test" was simplified and the so-called "long tests" for lower paid employees were deleted. This leaves one standard test for each category of exemption. Historically, these test provisions are the catalyst for most FLSA litigation.

The "discretion and independent judgment" requirement for administrative exemption was retained. The confusion and discussion concerning the boundaries of that requirement will likely continue.

Confusion also existed as to how paralegals should be classified under the former regulations. For example, the U.S. District Court for the Northern District of Texas, in Reich v. Page & Addison, No. 3:91-CV-3655-P, applying the former regulations, by jury decision entered March 10, 1994, found paralegals to be exempt under the administrative exemption. However the DOL, in an opinion letter dated February 19, 1998, used the former regulations to determine that paralegals should be considered non-exempt.

Much-needed clarification has arrived with Section 541.301(e) (7), which states:

Thus, the DOL currently considers paralegals as non-exempt employees who should be paid overtime. This position is consistent with the prior DOL opinion letter dated February 19, 1998, where the department determined paralegals should be considered non-exempt.

Under the learned professional exemption the key phrase seems to be "prerequisite for entry into the field." Until the paralegal profession universally requires a specialized academic degree as a standard prerequisite for entry into the field, it appears paralegals do not fall under the learned professional exemption. Section 541.301 (e) (7) discusses "other professional fields." At first blush it seems that even if a paralegal held a degree in paralegal studies, such degree would not meet the department’s new requirements. The future may hold more discussion of this point should specialized credentialing ever become mandatory for entry into the paralegal field.

In today’s workplace, paralegal professionals who attain their advanced knowledge through a non-traditional path, possess the same knowledge level and perform the same work as the traditionally degreed paralegal professionals should be classified and paid in the same manner as those degreed paralegal professionals. Equal treatment for degreed and non-degreed employees who perform the same work is common in employment law today. To reflect this reality, the department in Section 541.301(d) added the phrase "and performs substantially the same work" to the final regulation. Often in today’s workplace employees obtain advanced knowledge through a combination of work experience and intellectual instruction. When this occurs, focusing on the actual work performed of the non-degreed employee should provide a guideline to determine if the employee qualifies as an exempt learned professional. Leslie v. Ingalls Shipbuilding, Inc., 899 F. Supp 1578 (S.D. Miss. 1995).

For those paralegals seeking to trade their overtime protection for exempt status, Section 541.304 Practice of law or medicine in subpart (a) (1) states:

In the past few years across the United States, various states have contemplated regulation of paralegals by various means, including licensure and certification. The most recent activity is in North Carolina where, on April 23, 2004, the Council of the State Bar voted unanimously to publish the Plan for Certification of Paralegals for a 90-day comment period. This places North Carolina paralegals one step closer to certification. Current information about this proposal may be found at http://www.apps-nc.org/status.html.

Some states, like California, Florida, Louisiana and Texas have already implemented certification programs. Nationally, NFPA and NALA offer credentials. But simply because a paralegal obtains a certification does not mean the paralegal field is regulated. The paralegal profession is at present a largely unregulated profession, which occasionally hinders the profession itself.

If the day arrives when paralegals are uniformly regulated, either by licensure or certification, that may be the foothold needed for exemption under Section 541.304 (a) (1). It is well established that the paralegal profession exists as a direct result of the practice of law. Arguably, the paralegal profession is a direct branch of such practice. However, licensure and regulation are complicated issues and outside the scope of this article.

The DOL primarily relies upon the Supreme Court’s decision in Auer v. Robbins, 519 U.S. 452, 456 (1997) for authority to define and delimit its final regulations. See Also: Addison v. Holly Hill Fruit Products, Inc., 322 U.S. 607, 613 n.6 (1944); Spradling v. City of Tulsa, Oklahoma, 95 F.3d 1492, 1495 (10^th Cir. 1998), cert. denied, 519 U.S. 1149 (1997); Dalheim v. KDFW-TV, 918 F.2d 1220, 1224 (5^th Cir. 1990).

One new section, 541.4, highlights the FLSA as establishing minimum standards that may be exceeded, but cannot be waived or reduced. See Brooklyn Savings Bank v. O’Neil, 324 U.S. 697, 706 (1945). Employers, on their own or through a collective bargaining agreement, are not precluded by the FLSA from providing higher wages, shorter workweeks or higher overtime premium (double time, for example). NLRB v. R&H Coal Co., 992 F2d 46 (4^th Cir. 1993). However, nothing in the FLSA relieves an employer from its contractual obligation under a collective bargaining agreement.

In a move to avoid any detrimental effects of final federal overtime regulations on Illinois residents, Governor Rod Blagojevich (D) signed state legislation on April 2, 2004 exempting Illinois from federal overtime rules. This move was taken prior to the actual release of the new regulations. Federal law provides that if state or local law establishes a higher standard than the FLSA, the higher standard applies. See Section 18 of the FLSA, 29 U.S.C. § 218.

Employers have little time to come into compliance. The final regulations take effect on August 23, 2004. With this brief time until implementation, employers may wish to look at their non-supervisory employees classified as exempt in the administrative and professional categories. Of all employees these are at highest risk of being misclassified under the new regulations.

A small chance exists that FLSA’s regulations could be derailed under the Congressional Review Act. That Act gives Congress 60 session days after publication of the final regulations on April 23, 2004 to overturn them. (Congress used the Act in 2001 to overturn the Clinton Administration’s ergonomics regulations.) Congress needs a simple majority vote of both House and Senate to rescind the final regulations. In that event, President Bush could veto the action. The Senate would then need 67 votes (a two-thirds majority) to overturn his veto. An override appears unlikely given the current make-up of the Senate.

Short of overturning the proposed regulations, the Senate initiated other means to modify the impact of the impending changes. In fact, that process began on May 4^th, 2004, when Sen. Judd Gregg, R-N.H., introduced an amendment that passed on a 99-0 vote, which would preserve the current regulatory overtime status for 55 occupations or job classifications. Then, Sen. Tom Harkin, D. Iowa, introduced an amendment that passed on a 52-47 vote, which would allow only the increased salary requirements from the new final regulations to be enforced, while preserving the previous overtime regulations. Both amendments were offered as riders to an unrelated tax bill (S. 1637). Now the issues move to the House for further consideration. The overtime regulations may very well become an issue in the upcoming presidential election.

Enforcement of the new regulations is the responsibility of the DOL through its Wage and Hour Division (WHD). On April 27, 2004, U.S. Secretary of Labor Elaine L. Chao, named a new enforcement task force within the WHD to maximize worker’s rights under the final regulations. Non-exempt employees may file complaints concerning overtime pay with the DOL either by mail or in person at any WHD District Office. DOL indicates their investigators are discreet and will seek permission from the complainant to use their name if required, during an investigation. Additional information concerning complaints may be found at http://www.dol.gov/esa/regs/compliance/whd/fairpay/complaint.htm or by contacting the WHD toll-free between the hours of 8 a.m. to 5 p.m., in your local time zone at (866) 487-9243.