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Texas Paralegals and the New Overtime Regulations

The U. S. Department of Labor (DOL) released proposed rule changes to the Fair Labor Standards Act of 1938 (FLSA) for public comment on March 28, 2003.  During the ninety-day comment period 75,280 comments were received.  The DOL indicated over 90% of these 75,280 comments were form letters generated by organizations affiliated with the AFL-CIO expressing a general opposition.  This left approximately 600 substantive analysis comments on the proposed regulations.  Sadly, only a handful of these were received from individual paralegals, paralegal groups and associations. 

At the national level, The National Federation of Paralegal Associations, Inc. (NFPA) submitted comments, where the National Association of Legal Assistants (NALA) did not.  Notably, most statewide associations did not submit comments. 

The Legal Assistants Division of the State Bar of Texas (LAD) did not submit comments during the ninety-day comment period.  LAD, as a part of the State Bar of Texas (SBOT), must submit any comments to the SBOT for lengthy review and ultimate approval prior to their release.  Because the SBOT process is not only lengthy, but time consuming, submission of comments by LAD could not be accomplished within the comment period.

Unfortunately, other legal assistant organizations in the State of Texas, indicated they were going to follow LAD, which resulted in their not submitting comments either.  Thus, final DOL regulations were released without input from the majority of paralegals.

DOL documentation under occupation code 234 (legal assistants) shows 144,284 hourly and 210,917 salaried, for a total of 355,201, paralegals covered by the FLSA and subject to the Part 541 salary level test.   

On April 20, 2004, despite fierce political controversy, accompanied by a 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 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.

The full texts of the regulations were published on April 23, 2004 in the federal register.  A complete copy of those regulations may be found at http://www.access.gpo.gov/su_docs/fedreg/a040423c.html under Wage and Hour Division.

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

On the other hand, Section 541.601 in the final regulations states:

“An employee with total annual compensation of at least $100,000 is deemed exempt under section 13(a)(1) of the Act if the employee customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee identified in subparts B, C or D of this part.”

Therefore, highly compensated employees, who earn at least $100,000, may be exempt and not entitled to overtime pay.  

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 have been 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 under prior regulations as to how paralegals should be classified.  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-exemptConfused yet?

In the face of the confusion, the DOL did not alter its position concerning paralegals in the final regulations.  Clarification arrived with Section 541.301(e) (7), which states:

“Paralegals and legal assistants generally do not qualify as exempt learned professionals because an advanced specialized academic degree is not a standard prerequisite for entry into the field.  Although many paralegals possess general four-year advanced degrees, most specialized paralegal programs are two-year associate degree programs from a community college or equivalent institution.  However, the learned professional exemption is available for paralegals who possess advanced specialized degrees in other professional fields and apply advanced knowledge in that field in the performance of their duties.  For example, if a law firm hires an engineer as a paralegal to provide expert advice on product liability cases or to assist on patent matters, that engineer would qualify for exemption.” (emphasis added)

Bottom line, the DOL continues to consider 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 if a paralegal held a degree in paralegal studies (this field), such degree would not meet the departments’ new requirements.  Thus rests a controversy for another day.

Degrees aside, 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 guiding light to determine if the employee qualifies as an exempt learned professional.  Leslie v. Ingalls Shipbuilding, Inc., 899 F. Supp 1578 (S.D. Miss. 1995). 

In today’s 21st Century 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. 

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:

“Any employee who is the holder of a valid license or certificate permitting the practice of law or medicine or any of their branches and is actually engaged in the practice thereof” (emphasis added)

Although licensure and regulation are very complicated issues and exceed the scope of this article, a brief brush with this subject is in order.

In the past few years across the United States, various states have entertained regulation of paralegals through various forms, 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 certifications.  Nationally, NFPA and NALA offer credentials. Because a paralegal obtains a certification does not mean the paralegal is regulated.  The paralegal profession is largely unregulated, which occasionally hinders the profession as a whole and those paralegal professionals within it. 

Should the day arrive when paralegals are uniformly regulated, either by licensure or certification, that may be the day a foothold; is received for paralegal exemption under Section 541.304 (a) (1) as a branch of the practice of law.  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.  Stay tuned for more developments with this subject.

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 the 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 (10th Cir. 1998), cert. denied, 519 U.S. 1149 (1997); Dalheim v. KDFW-TV, 918 F.2d 1220, 1224 (5th Cir. 1990).

Section 541.4, of the new regulations establishes 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 (4th Cir. 1993).  Nothing in the FLSA relieves an employer from its contractual obligation under a collective bargaining agreement.

In a unique move, out of concern for how the final federal overtime regulations may affect Illinois residents, Governor Rod Blagojevich (D) signed state legislation on April 2, 2004 exempting Illinois from federal overtime rules.  The Governor took this action prior to the release of the final regulations.  Federal law provides that if a 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. 

The final regulations take effect on August 23, 2004.  With only a few short months to implementation, employers may wish to look at 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 the April 23, 2004 publication of the final regulations 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.  If that vote did occur, President Bush would likely veto the action.  The Senate would then need 67 votes (a two-thirds majority) to overturn his veto.  An override vote appears unlikely given the current make-up of the Senate.

May 4th, 2004, may prove to be a historical day for the Overtime regulations in the Senate.  It began 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 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. 

U.S. Secretary of Labor Elaine L. Chao on April 27, 2004, named a new enforcement task force within the Wage and Hour Division (WHD) of the DOL to, as she puts it, “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.    

Will paralegals suffer as a result of the final regulations?  Do the final regulations mean an end to the lawsuit frenzy?  What will the ultimate impact on the workforce be?  These and many more questions will be answered only with the passage of time.

It should be noted that federal and state laws regarding overtime are very detailed, containing several exceptions and caveats that cannot be fully addressed in this article.  Employers and employees are advised to seek guidance from legal counsel regarding the handling of overtime matters.  Employers should also seek the advice of legal counsel before refusing to pay employees overtime.  This article is not intended nor should it be considered legal advice.  Each overtime employment issue is unique and specific.  Every employer and employee is encouraged to seek guidance from legal counsel concerning your specific overtime matter.

Jim Barber is an accomplished author with articles published in various legal publications and journals. .

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