WORKING OVERTIME TO REEXAMINE THE VALUE OF A LAW LICENSE

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For associates starting at big and medium-sized law firms fresh out of law school, performing document review for the firm’s big cases is generally seen as their rite of passage – something they need to endure in the hopes of someday becoming a litigator. For at least the first few years, these associates usually are expected to be available to work around the clock with little, if any, hope of having a personal life.

Increasingly, these big document review projects are handled not only by first-year associates, but also by paralegals and law school graduates who haven’t been licensed to practice law and who are hired on a project basis. While the associates can still put in billable hours for their work, paralegals and law school graduates usually are paid by the hour.

Recently, however, the U.S. Court of Appeals for the Second Circuit issued a decision that may force firms to re-examine how they allocate the work for document review projects. In Lola v. Skadden,Arps, Slate, Meagher & Flom (No. 14-3845), the Second Circuit ruled that those performing document review under the supervision of an attorney providing specific instructions are not considered “practicing law,” for purposes of the professional exemption of the Fair Labor Standards Act, and are thus entitled to overtime pay for all hours worked in excess of 40 per workweek.

This decision not only puts firms under a microscope in terms of how they pay document reviewers, but raises the question of whether they may be exposed to charges of having non-lawyers possibly practice law without a license.

Case Background

Lola v. Skadden involves a lawyer licensed to practice in the state of California who took a position as a document reviewer for the law firm Skadden at a set hourly rate. While the case in question was based in Ohio, the document review for the case took place entirely in North Carolina. Mr. Lola typically worked 45-55 hours per week and received no overtime pay.

Eventually, Lola filed a collective action suit against the firm in the Southern District of New York (where the firm is headquartered) under the FLSA, arguing that the type of work he and others similarly situated were asked to perform was protected under the FLSA with the requirement that time-and-a-half be paid for overtime hours (hours worked in excess of 40 in a workweek). Skadden, meanwhile, argued that Lola was properly exempt from receiving overtime pay under the FLSA due to the professional exemption, which states that anyone working in a position that requires a professional license (which includes a license to practice law) is exempt from having to be paid overtime.

While the district court granted Skadden’s motion to dismiss for failure to state a claim, the Second Circuit reversed that decision on appeal, stating that based on the allegations of the complaint, Lola can make the argument that the type of work he was performing does not amount to the “practice of law” under North Carolina law and therefore he is not exempt from overtime requirements. However, Skadden can still argue that the work Lola was doing was “practicing law” for the purposes of the FLSA exemption once discovery has been conducted.

The “Practice of Law”

One of the primary questions in this case is whether one can be considered “practicing law” for FLSA purposes with or without having an actual license to practice law. More basically, it asks what it means to be “practicing law.” 

Noel Tripp, a shareholder with the employer-side firm Jackson Lewis P.C. in Melville, N.Y., explained that most of the distinctions between legal work and administrative work come from ethics opinions issued on a state-by-state basis by bar organizations, all of which set their own rules governing practice. “There is very little guidance under the FLSA regarding the ‘practice of law’ within the meaning of 29 CFR § 541.304,” said Tripp.

Alan Quiles, a senior attorney with the employee-side Shavitz Law Group in Boca Raton, Fla., agrees with this assessment, adding that it generally comes down to judgment and discretion. “If you exercise judgment and discretion, you are likely practicing law in just about any state,” explained Quiles. “In the context of document review, if your judgment or discretion as to asserting a privilege or determining its relevance to a request is ultimately reviewed and is the responsibility of a licensed attorney, than you are probably not practicing law.”

Quiles further explained that the court’s opinion was based on a distinction between what it means to be “practicing law” in the FLSA context and what it means in the context of an individual state’s ethics rules. “The Lola court created a sort of Venn Diagram in its analysis whereby a smaller circle (the work that requires a law license) is completely contained in the larger circle (tasks performed by lawyers),” said Quiles. 

Both Quiles and Tripp also pointed out that there are a lot of tasks that lawyers regularly perform that are also performed by non-lawyers in law firms and in other industries across the country. “Plaintiff’s counsel has argued, essentially, that the license to practice is not dispositive of whether the person is practicing law, even if the employer/law firm has specifically designated the work as work which can only be performed by someone with that license,” said Tripp.

Practicing Law Without a License?

While having a license to practice law may not be dispositive of whether a person is, in actuality, practicing law, could law firms conversely be allowing people to illegally practice law without a license under these circumstances? Both Quiles and Tripp believe the answer to that question, ultimately, is “no” because the general consensus is that while it would be preferable for certain tasks to be performed by lawyers rather than paralegals and other non-licensed personnel, it does not make what they do “the practice of law.”

However, Quiles concedes that the argument that those performing this sort of work without a license should be considered exempt from FLSA requirements is a tricky one. “To avoid subjecting the employer to charges of the unauthorized practice of law, the argument would necessarily include an analysis that the ‘practice of law’ under the FLSA is unrelated to the ‘practice of law’ as defined by state licensing agencies and state Unauthorized Practice of Law statutes,” said Quiles. “Such an exemption would include paralegals, legal assistants and other law firm employees long-held to be non-exempt.”

In the meantime, Tripp advises that law firms and legal placement firms must continue to abide by ethical rules and classify workers appropriately under wage-hour law. “If Mr. Lola ultimately prevails on his claim, more of the workers performing document review services may someday be treated as overtime-eligible,” said Tripp.

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