To Pay or Not to Pay:
That's a Good Question

by Lindsey Martin-Bowen

What's with all the controversy about exempt-nonexempt status? What advantage does being "exempt" offer paralegals? Is "exempt" truly tantamount to "professional," or is it merely a term employers use to skimp on paying overtime? What does the pertinent labor statute say? And what do paralegals report about how most employers categorize them?

Exempt/Nonexempt

Here we may have another case of Wag the Dog syndrome, an epidemic in our media-oriented, image-oriented society. In the DeNiro-Hoffman flick, the U.S. president's special agent (Robert DeNiro) hires a Hollywood producer (Dustin Hoffman) to create a "war" on film, complete with marketing tie-ins, popular songs, and T-shirts, to dupe the American public into believing the U.S. had engaged in a war with Albania, even though no such conflict existed. And like quintessential image-promoters, the colluders deny this reality. "Of course, there's a war," the DeNiro character quips. "I saw it on TV."

So seeing something on TV makes it real? Hardly! Likewise, many images simply aren't reality. Such is the case with "exempt" status. Judging from a 1993 Reporter survey that garnered paralegals' responses about their preferences for "exempt" or "nonexempt" status, many paralegals have linked "exempt" with being "professional." Why?

"Professionals don't punch a time clock," some of the respondents concluded. And yet, examining the source of the exempt/nonexempt designations, the Fair Labor Standards Act of 1938, as amended (FLSA, or the Act), reveals it uses the term "professional" as merely a category in the "exempt" description.

No Pro Ranker

Congress passed the FLSA to create "minimum wage, overtime pay, recordkeeping and child labor standards that affect over 100 million full- and part-time workers in the private sector and in federal, state and local governments." (29 U.S.C. § 201 et seq.; 29 CFR 510) The Act simply separates occupations that require employers to pay overtime from those that don't. It designates some "professional" positions as "exempt" but doesn't identify those not included as "nonprofessional."

Although the "exempt" category comprises "executive, administrative and professional employees" (teachers, academic administrators in elementary and secondary schools, outside sales employees, and what the Department of Labor regs define as "certain skilled computer professionals"), it also includes occupations that do not evoke a "professional" image.

FLSA designates the following employees as exempt from both the minimum wage and overtime pay requirements:

• employees of certain seasonal amusement or recreational establishments;
• employees of certain small newspapers and switchboard operators of small telephone companies;
• seamen employed on foreign vessels;
• employees engaged in fishing operations;
• employees engaged in newspaper delivery;
• farm workers employed on small farms (meaning those that used fewer than 500 "man-days" of farm labor in any calendar quarter of the preceding calendar year);
• casual babysitters and persons employed as companions to the elderly or infirm (29 U.S.C. § 201 et seq.)

Then, the Act lists examples of employees exempt from overtime pay requirements only:

• certain commissioned employees of retail or service establishments;
• auto, truck, trailer, farm implement, boat or aircraft sales workers, or parts clerks and mechanics servicing autos, trucks, or farm implements, who are employed by non-manufacturing establishments primarily engaged in selling these items to ultimate purchasers;
• railroad and air carrier employees, taxi drivers, certain employees of motor carriers, seamen on American vessels, and local delivery employees paid on approved trip rate stations;
• domestic service workers living in their employer's residence;
• employees of motion picture theaters; and
• farmworkers (29 U.S.C. § 201 et seq.)

Finally, the Act specifies that "[c]ertain employees may be partially exempt from . . . overtime pay requirements." Those employees include:

• employees engaged in certain operations on agricultural commodities and employees of certain bulk petroleum distributors;
• employees of hospitals and residential care establishments that have agreements with the employees to work a 14-day work period in lieu of a seven-day work week (if the employees are paid overtime premium pay within the Act's requirements for all hours they work over eight in one day or 80 within the 14-day period, whichever overtime hours are higher);
• employees who lack a high school diploma or who have not completed the eighth grade. If these persons receive normal wages for the hours they spend in such training, they are required to spend up to 10 hours in a work week for remedial reading or training in other non-job specific skills. Employers need not pay such employees overtime premium pay for their remedial training hours. (29 U.S.C. § 201 et seq.)

Again, even if the Act includes professionals in its "exempt" category, it doesn't link "nonexempt" with "nonprofessional." In fact, the federal government categorizes a paralegal position as "Paralegal Specialist, GS-9509," using a term (specialist) it often uses to designate professional positions. Nonetheless, the feds often pay paralegals overtime (41.7% do), depending upon the work they perform and upon the agency where they work.

The Real World:   Reich (DOL) v. Page & Addison

Even the defendants in this still-controversial case didn't argue paralegals were exempt from overtime because they were professionals. Rather, the defendants claimed they paid paralegals no overtime because "they are employed in a bona fide administrative capacity." (Reich v. Page & Addison, No. 3:91-CV-2655-P, 1994 WL 143208 at *1 (N.D. Texas March 9, 1994).

Defendants Page & Addison chose this definition for a good reason: "administrative capacity" remains far easier to define than "professional." Then, when DOL lost this case, employers of paralegals became free to classify them as exempt by defining their roles as administrative.

Moreover, whether or not employers pay paralegals overtime comes down to a question of semantics: Do the paralegals work in "an administrative capacity" or not? The professionalism question isn't an issue.

Indeed, interpreting the Act's definition of professional can be complex. Here's why.

Defining a Pro

According to Webster's Unabridged, the noun "professional" means ". . . a person belonging to one of the professions . . . a person who makes some activity not usually followed for gain, such as a sport, the source of his livelihood."

Then, the dictionary defines "profession" as ". . . a vocation or occupation requiring advanced training in some liberal art or science, and usually involving mental rather than manual work, as teaching, engineering, writing, etc.; especially, medicine, law, or theology (formerly called the learned professions)."

Obviously, paralegals meet this definition. But the crucial factor for deciding if a person is exempt does not lie solely in deciding whether that employee is a professional. According to the Wages Hours Manual (Manual) of the Bureau of National Affairs (BNA), distinguishing between exempt and nonexempt professionals can be confusing. Within the section describing professional employees, it admits, "The exemption for professional employees is the most complex of all the white-collar exemptions, since it covers a wide variety of occupations. These range from the practice of law and medicine, the traditional professions, to designing, writing, acting, and other so-called artistic professions."

Further, in its Checklist for Teaching, Law, and Medicine, the Manual sets forth the question, "Is the employee the holder of a valid license or certificate permitting the practice of law?" to decide if the employee qualifies as exempt. Thus, the Act uses the narrower, antiquated "learned profession" definition of "professional" to define an exempt employee.

. . . it should be noted that most jurisdictions have strict prohibitions against the unauthorized practice of law . . . Under the American Bar Association's Code of Professional Responsibility, a delegation of legal tasks to a lay person is proper only if the lawyer maintains a direct relationship with the client, supervises the delegated work and has complete professional responsibility for the work produced.

Nevertheless, numerous paralegals qualify for exempt status when they work within an administrative capacity. In fact, NFPA's 1999 Paralegal Compensation and Benefits Report (1999 Report) reveals employers' answers to the exempt/nonexempt question vary, whether those employers are government agencies or private enterprises.

What Employers Do

According to NFPA's 1999 Report, employers of paralegals remain split about giving paralegals "exempt" status. And types of government employers vary in the way they rank paralegal status about as much as private firms do.

For instance, fewer than half (40%) of city governments deem paralegals "exempt." More than half (53.3%) consider them "nonexempt." (6.7% didn't respond or ranked them as "other.") In contrast, the federal government flipped this response, with 58.3% of federal government paralegals holding exempt status, 41.7% holding nonexempt.

State government stats emulate those of city government (43.1% of state paralegals are exempt; 56.9%, nonexempt), whereas court statistics align more with fed stats: 66.7% exempt; 33.3% nonexempt.

In the private sector, law firms designate 39.8% of their paralegals exempt; 56.6% deem them nonexempt. (.2% came in as "other/no response.") But corporations skirt away from paying paralegals overtime. Almost three-quarters (73.3%) of for-profit corporations consider paralegals exempt; a quarter (25.2%) pay them overtime, and 1.5% responded "other" or didn't reply.

Legal technical firm stats reveal half (50%) of those employers classify paralegals as exempt, 37.5% pay them overtime, and 12.5% marked "other" or didn't respond. The greatest number of non-profit corporations (72.5%) deem paralegals exempt. Only 27.5% pay them overtime.

Freelance paralegal stats were the most remarkable. More than half of those paralegals (52.5%) marked the "other" status (or didn't respond), and 37.5% indicated they fell into the exempt status. Only 10% of freelance paralegals receive overtime.

Surprisingly, the average salary for exempt versus nonexempt respondents varies less than $2,000 a year: $36,424 for exempt; $34,875 for nonexempt paralegals. And only a little more than half (51.1%) of the paralegals earning between $40,000 and $50,000 annually were exempt.

The Feds Vary, Too

Although a Department of Labor spokesperson said government classifications of paralegals vary, the Office of Personnel Management (OPM) classifies the Paralegal Specialist as a GS-950, distinguishing it from Legal Clerical and Assistance (GS-986) positions. (The OPM website doesn't indicate if the government classifies either position as exempt or nonexempt from overtime.)

But, in line with FLSA rules, a paralegal's GS classification -- unless the paralegal position reaches a capped ranking (GS-9, 11 or higher) -- generally isn't the deciding factor for designating the employee as exempt. Instead, whether a paralegal earns overtime may depend upon a paralegal's location within the federal system.

Paralegal Specialist Lori Thompson, with the FDIC since 1991, stressed that she couldn't speak for the entire federal government, especially because she works for a regulatory agency that isn't within the regular federal budget. (The GS Paralegal Specialist classification for paralegals in regulatory agencies varies, too: It's CG 950 rather than GS 950.)

Thompson noted that the FDIC no longer uses pay "steps," the traditional method the feds use to categorize annual cost-of-living pay increases. "The FDIC groups salaries in four different bands," she explained, adding that paralegals in federal banking services enjoy a 10% higher pay scale than other federal paralegals. And they receive overtime, thanks to the National Treasury Grievance a few years ago. "But the Grievance didn't affect those paralegals not in the federal banking sector," Thompson added.

Obviously, then, at the FDIC, nonexempt isn't tantamount to nonprofessional. Plus, according to BNA, the FLSA realizes both exempt and nonexempt professionals exist, and it deems some nonprofessional employees "exempt," depending upon their occupations.

So perhaps it's time the dog wagged its tail with this image: Getting overtime pay doesn't imply a paralegal isn't a professional. It means the paralegal is valued for his or her hard work.

Reporter staff writer Lindsey Martin-Bowen, J.D., teaches journalism, writing, and cultural studies at the University of Missouri-Kansas City. She holds an M.A. in English/creative writing. A former Reporter editor, she worked as a staff member for the UMKC Law Review from 1998 to 1999. In 1997, the law review published her Comment Words from a Teller of Tales: Can Storytelling Play a Role in Feminist Jurisprudence? (66 UMKC L. Rev. 95).

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