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HOW THE NEW FAIR LABOR STANDARDS ACT AFFECTS YOU

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HOW THE NEW FAIR LABOR STANDARDS ACT AFFECTS YOU Amy Scott, Esq. Von Hays, Esq. Kirkpatrick & Lockhart LLP 2828 N. Harwood, Suite 2800 Dallas, TX 75201 – PowerPoint PPT presentation

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Title: HOW THE NEW FAIR LABOR STANDARDS ACT AFFECTS YOU


1
HOW THE NEWFAIR LABOR STANDARDS ACT AFFECTS YOU
  • Amy Scott, Esq.
  • Von Hays, Esq.
  • Kirkpatrick Lockhart LLP
  • 2828 N. Harwood, Suite 2800
  • Dallas, TX 75201
  • (214) 939-4900 phone
  • (214) 939-4949 fax

2
INTRODUCTION TO THE FAIR LABOR STANDARDS ACT
(FLSA)
  • The FLSA was enacted to afford workers basic wage
    hour protections. Specifically, the FLSA
    establishes standards regarding minimum wage,
    equal pay for equal work, child labor, record
    keeping obligations and overtime pay.

3
FLSA COVERAGE
  • Coverage
  • Basically all employees of enterprise
  • Individual employees who work in interstate
    commerce
  • Employees
  • Individuals suffered or permitted to work
  • Independent contractors are not employees
  • Trainees/interns are not employees
  • Patient workers (mentally ill or retarded)
  • Volunteers

4
OVERTIME COMPENSATION
  • The FLSA requires employers to pay overtime
    compensation to all non-exempt employees.
  • Overtime pay is calculated at 1.5 times the
    regular rate for every hour worked in excess of
    40 during the work week
  • Payment of overtime is mandatory it cannot be
    waived by employee or employer

5
Time-and-One-Half
  • The overtime standard is time-and-one-half
    (subject to certain exceptions when employees are
    paid salaries, commissions, fees)
  • Anything less is insufficient to satisfy FLSA
    requirements
  • Anything more (double-time, triple-time and other
    forms of premium pay) are creatures of contract
    and are not required by the FLSA

6
40 Hour Standard
  • No overtime is owed until an employee works 40
    hours in the work week
  • All subsequent hours must be paid at
    time-and-one-half
  • FLSA does not require payment of overtime for
    hours worked in excess of 8 in a day, or hours
    worked on weekends or holidays, or hours worked
    outside of the normal work schedule
  • FLSA does not have a maximum hours provision

7
Exceptions to the Overtime RulesWhite Collar
Exemptions
  • Wage and Hour Rules Protect Non-Exempt
    Employees Only.
  • Exempt Employees Under the FLSA.
  • 1. White Collar Exemptions
  • (a) Executive employees
  • (b) Administrative employees
  • (c) Professional employees
  • 2. Computer Professionals
  • 3. Outside Sales Representatives
  • Commissioned Sales Persons
  • The new FLSA regulations that take affect on
    8/23/04 will alter dramatically the way in which
    these White Collar exemptions are applied.

8
Overview of New Regulations as they Pertain to
White Collar Exemptions
  • Executive Exemption Test
  • To qualify for the executive employee exemption,
    the following criteria must be satisfied
  • (1) The employee must be compensated on a
    salary basis at a rate not less than 455 per
    week
  • (2) The employees primary function must be
    managing an enterprise, a subdivision of the
    enterprise, or a recognized department
  • (3) The employee must regularly and customarily
    direct the work of at least two or more full time
    employees
  • (4) The employee must have the authority to hire
    or fire, or the employees suggestions as to
    personnel decisions like hiring and firing should
    be relied upon with some level of regularity.

9
Learned Professional Exemption Test
  • (1) The employee must be compensated on a salary
    basis at a rate not less than 455 per week
  • (2) The employees primary duty must constitute
    work requiring advanced knowledge (intellectual
    in character) that is in a field of science or
    learning
  • (3)  The advanced knowledge must be customarily
    acquired by a prolonged course of specialized
    instruction and
  • (4) The employee must execute his/her duties
    with sufficient independent judgment and
    discretion.

10
Administrative Exemption Test
  • (1) The employee must be compensated on a salary
    basis at a rate not less than 455 per week
  • (2) The employees primary duty must be the
    performance of office or non-manual work
    directly related to the management or general
    business operations of the employer or the
    employers customers
  • (3) The employee executes his/her primary duties
    with sufficient independent judgment and
    discretion with respect to matters of
    significance.

11
What effect, if any will these changes have on
paralegals?
  • Historically, paralegals have been classified as
    non-exempt and therefore, entitled to overtime
    pay.
  • The regulations have not specifically carved out
    an exemption for paralegals.
  • The DOL has issued opinion letters stating
    paralegals do not satisfy the administrative
    exemption because they are performing basic tasks
    or production-oriented work and are not
    exercising sufficient independent judgment and
    discretion. DOL Opinion Letter April 13, 1995,
    Wage Hour Manual.

12
What effect, if any will these changes have on
paralegals? (cont)
  • Other DOL opinion letters have stated paralegals
    do not satisfy the Learned Professional Exemption
    because a prolonged course of study is not a
    prerequisite to enter the field. DOL Opinion
    Letter, Wage Hour Manual, February 19, 1998.
  • A prolonged course of study is defined in the DOL
    Field Operations Handbook as at least a
    baccalaureate degree or is equivalent.

13
The New Regulations and the Opportunity For
Change - Paralegals push for Professional
Exemption Status
  • With the introduction of the new regulations and
    the opportunity for public comment, many
    paralegal associations submitted testimony urging
    the DOL to make paralegals exempt under the new
    regulations.

14
Paralegals as Learned Professionals
  • Paralegal groups advocating Professional exempt
    status pointed to the fact that many paralegals
    have strong educational backgrounds and
    expertise.
  • Paralegal Advanced Competency Exam (PACE)
  • Although not a pre-requisite to enter the field,
    paralegals who desire to take the exam must meet
    the following educational requirements
  • Associate Degree from accredited school and 6
    years substantive experience or
  • Bachelors Degree and 3 years substantial
    experience or
  • Bachelors and 2 years substantial experience,
    completion of paralegal program and no felonies.

15
Proponents further pointed out many paralegals
have advanced degrees (i.e., M.A.) or have
specialized degrees in a particular area (i.e.
engineering or medicine) and they use their
specialized knowledge in the performance of their
legal duties.
Paralegals as Learned Professionals (cont)
16
Paralegals as Learned Professionals (cont)
  • Proponents also noted paralegals are able to
    provide client representation in certain forums
    thereby, warranting a professional exemption.
  • For example, paralegals may represent clients in
    OSHA, SSA and Veterans Administration hearings
  • California permits paralegals to represent
    clients before workers compensation boards with
    client permission and under attorney supervision.

17
The National Federation of Paralegal
Associations, Inc. (NFPA) proffered testimony to
the Wage Hour Division regarding the changes to
the FLSA regulations.
Paralegals as Learned Professionals (cont)
  • In addition to detailing many arguments in favor
    of recognizing paralegals as Learned
    Professionals, the NFPA recommended the following
    changes to the proposed regulations.

18
Administrative Exemption
  • The NFPA urged an increase in the minimum salary
    threshold to 650 per week.
  • In addition to the basic administrative exemption
    requirements, the NFPA suggested a person may
    meet the administrative exemption if they hold a
    position of responsibility with the employer and
    regularly exercise discretion and judgment,
    noting the discretion and judgment is not limited
    to independent judgment.

19
Professional Exemption
  • The NFPA again urged an increase in the minimum
    salary threshold to 650 per week.
  • The NFPA also suggested an individual would
    qualify for the Learned Professional Exemption if
    the following criteria is met
  • (1) An individuals primary duty consists of
    performing office or non- manual work that
  • Requires knowledge of an advanced type in a field
    of science or learning customarily acquired by a
    prolonged course of specialized intellectual
    instruction, but which also may be required by
    alternative means such as an equivalent
    combination of intellectual instruction and/or
    work experience or
  • Requires invention, imagination, originality or
    talent in a recognized field of artistic or
    creative endeavor

20
Professional Exemption (cont)
  • (2) An individual customarily and regularly
    exercises discretion and judgment
  • An individual performs work that is predominantly
    intellectual and varied in character, is not
    easily spread to other workers, and is of such
    character that the output produced or result
    accomplished cannot be standardized in relation
    to a 37.5 to 40-hour work week and
  • Who does not devote more than 20 percent of time
    to activities that are not an essential part of
    and necessarily incident to exempt work.

21
Status of Paralegals as Professionals under the
new regulations
  • Non-exempt with a few possible exceptions.

22
Status of Paralegals as Professionals under the
new regulations
The DOL has stated Paralegals generally do not
qualify as exempt learned professionals because
an advanced specialized academic degree is not a
pre-requisite to enter the field.
23
Status of Paralegals as Professionals under the
new regulations
  • In reaching its decision, the DOL noted it
    received many comments from paralegals expressing
    concern over possible exempt status while others
    urged the DOL to declare paralegals as
    professionals.
  • Importantly, none of the commenters were able to
    state the educational requirement for paralegals
    was more than a 2-year associate degree.
  • This does not satisfy the prolonged course of
    study duties requirement of the Professional
    Exemption.

24
HOWEVER . . .
  • The DOL has noted the learned professional
    exemption may be available to paralegals who have
    advanced specialized degrees and apply that
    knowledge in the performance of their duties.
  • For example, a paralegal who is an engineer and
    offers advice on patent or product liability
    matters may qualify.
  • This could open the doors also for paralegals
    with medical backgrounds who work in medical
    malpractice firms or personal injury firms.
  • In-house paralegals likely will remain
    non-exempt, unless there is a specific area of
    expertise that is used often in connection with
    legal duties.

25
AND WHAT ABOUT THE DOL V. PAGE ADDISION
DECISION?
  • The DOL filed a federal suit against the law firm
    of Page Addison for alleged FLSA violations in
    failing to pay their paralegals overtime pay.
    The law firm argued the paralegals were exempt
    administrators under the FLSA
  • On March 10, 1994, a Dallas jury agreed the
    paralegals were exempt because they exercised
    sufficient amounts of independent judgment and
    discretion necessary to qualify them for the
    administrative exemption

26
AND WHAT ABOUT THE DOL V. PAGE ADDISION
DECISION? (cont)
The DOL filed an appeal to the Fifth Circuit but
later abandoned its appeal with prejudice on
September 22, 1994
27
So is the Exemption Status of Paralegals Any More
Clear?
  • The new regulations suggest paralegals MAY
    satisfy the learned professional exemption in
    limited circumstances.
  • Then there is the Page Addison decision
    suggesting paralegals MAY satisfy the
    administrative exemption, but there is no written
    opinion or 5th Circuit ruling.

28
So where do we go from here?
Q A
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