Lawyers Who Review Documents May Be Eligible For Overtime Pay, Says Federal Appellate Court In New York

On July 23, 2015, in Lola v. Skadden, Arps, Slate, Meagher & Flom LLP, No. 14-3845 (2d Cir. July 23, 2015), the U.S. Court of Appeals for the Second Circuit, reversing the U.S. District Court for the Southern District of New York’s order dismissing the plaintiff contract lawyer’s putative collective action, held that the plaintiff stated a claim upon which relief can be granted for failing to pay overtime compensation in violation of the federal Fair Labor Standards Act, 29 U.S.C. §§ 201 – 219. The Lola Court held that the plaintiff contract lawyer’s complaint adequately alleged that the document review which the plaintiff was hired to conduct “was devoid of legal judgment such that he was not engaged in the practice of law” within the meaning of the attorney exemption from the overtime requirement, 29 C.F.R. § 541.304(a)(1).

The U.S. Court of Appeals for the Second Circuit (the “Second Circuit”) hears appeals from judgments and orders of the federal district courts sitting in the states of New York, Connecticut, and Vermont.

Contract lawyers are practitioners who perform legal services for other lawyers on an intermittent or impermanent hourly or project basis, rather than on a salaried basis. See Deborah Arron & Deborah Guyol, The Complete Guide to Contract Lawyering: What Every Lawyer and Law Firm Needs to Know about Temporary Legal Services 6 (Decision Books 2004).

The supply of individuals with law degrees and law licenses substantially exceeds the number of salaried legal positions in the private and public sectors. Consequently, thousands of unemployed attorneys, in New York City (including the borough of Manhattan) or elsewhere, are retained, either by staffing agencies, by large law firms or corporations, or jointly by a staffing agency and a large law firm or corporation, as contract lawyers.

Although contract lawyers’ duties vary widely, many, if not most, contract lawyers perform junior associate or paralegal-type work, such as reviewing documents which have been, or which may be, produced in the discovery phase of litigation. Typically, a contract attorney is paid at an hourly rate which is significantly lower than the quotient of a salaried attorney’s annual salary divided by the annual number of hours worked by the salaried attorney.

The FLSA and its implementing regulations, 29 C.F.R. §§ 510 et seq., require that most employees in the U.S. be paid overtime pay at 1½ times the regular rate of pay for all hours worked in excess of 40 hours in a workweek. However, the FLSA’s regulations set forth an exemption from overtime pay for “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.” 29 C.F.R. § 541.304(a)(1).

In Lola, defendant Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”), a large law firm based in the borough of Manhattan and with offices nationwide, and defendant Tower Legal Staffing Inc. (“Tower”), a temporary staffing agency based in New York which provides, to law firms and corporate law departments, contract attorneys and paralegals, allegedly jointly employed the plaintiff individual, a California-licensed attorney residing in North Carolina, as a contract lawyer. For a modest $25 per hour, the plaintiff reviewed documents for Skadden in North Carolina in connection with a multi-district litigation pending in the U.S. District Court for the Northern District of Ohio.

The plaintiff alleged that his work was closely supervised by Skadden and Tower, and that his ” ‘entire responsibility . . . consisted of (a) looking at documents to see what search terms [provided by the defendants], if any, appeared in the documents, (b) marking those documents into the categories predetermined by Defendants, and (c) at times drawing black boxes to redact portions of certain documents based on specific protocols that Defendants provided.’ ”

In Lola, the Second Circuit held that (i) state law, not federal law, bears on what constitutes “actually engaging in the practice [of law]” wuithin the meaning of the FLSA’s regulations’ attorney exemption from overtime pay, 29 C.F.R. § 541.304(a)(1), (ii) under North Carolina law, engaging in the ” ‘practice of law’ ” requires “the exercise of at least a modicum of independent legal judgment,” and (iii) “document review per se [does not] constitute[] practicing law in North Carolina.” As stated, the Lola Court determined that, because the plaintiff individual’s complaint adequately alleged “that he failed to exercise any legal judgment in performing his duties for Defendants,” the plaintiff stated a claim upon which relief can be granted for failing to pay overtime compensation in violation of the FLSA.

Take-Aways For Employers

Employers’ narrow take-away from the Second Circuit’s Lola decision is that, if an employer and/or a staffing agency retains a contract lawyer to perform services which are “devoid of legal judgment,” it’s likely that that contract lawyer is not exempt from the FLSA’s overtime pay requirement.

The broader take-away, for employers, from Lola is that job titles (and, for that matter, law or medical licenses) do not decide overtime-exempt status. For an exemption to apply, a worker’s specific job responsibilities and salary must satisfy all the requisites of the U.S. Department of Labor’s regulations.

Finally, although, in Lola, the plaintiff individual was a contract lawyer, the document reviews that the Lola plaintiff conducted are tasks performed by, among others, many first- and second-year associates at large law firms. A future case may address whether any junior-level associates at large law firms whose job responsibilities consist primarily of reviewing discovery documents according to prescribed criteria or of performing other tasks “devoid of legal judgment” are exempt from the FLSA’s overtime pay requirement.

Call New York City Employment Lawyer David S. Rich at (347) 835-5688 to consult with a knowledgeable labor and employment attorney about ensuring that your company complies with overtime pay and other wage and hour laws, or to retain a skilled overtime lawyer to defend your company in overtime pay lawsuits or other wage and hour litigation.