Paralegals: FLSA Exemption Applicability

Paralegals: FLSA Exemption Applicability

On August 23, 2004, the “white – collar” exemption guidelines under the Fair Labor Standards Act (“FLSA”) were amended for the first time in almost 30 years. Under the FLSA, all workers are entitled to overtime pay. Only employees determined to be exempt under the ‘white-collar’ guidelines may be excluded from non-exempt, hourly compensation procedures. Specifically, the regulations at 29 C.F.R. Part 541 ( “Part 541”) provide exemption from overtime compensation for specific types of executive, professional, or administrative workers ( “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees”, 2004).

The revisions made to the FLSA language were highly anticipated for some time. The job duty requirements needed to satisfy the “exempt employee” definition had not been altered since 1949. The minimum salary required to meet exemption standards had not been updated since 1975. Until the regulations were revised, the theoretical possibility existed that an employee earning only $8,060 per year could have been classified as an executive, and denied overtime compensation (“Defining and Delimiting….”, 2004).

According to several resources utilized, many employers “large and small, public and private – don’t understand how to interpret the exemption regulations under the Fair Labor Standards Act” (Ritter, 2002). One of the benefits provided by the FLSA revision was the amount of open conversation, debate, and contention that occurred as a result of the proposed rulemaking, which spurned immense interest in FLSA compliance (Priest, Coleman; 2004). Many employers, industry groups, and lobbyists answered the proposed regulations with individual legal opinions, either concurring with or arguing against the new Part 541 language. Since the August 2004 enactment, quite a few employment law consultants have held symposiums or seminars, answering questions and concerns about the changes made.

For the purpose of this research, the newfound ability to locate insightful, modern analyses of the FLSA exemption standard has been incredibly useful. “The revisions which became effective on August 23, 2004, sparked a flurry of action in the legal community as employment lawyers across the country scrambled to digest the changes and advise their clients” (Priest, Coleman; 2004). Had the FLSA revisions not occurred, it is questionable whether the dearth of current, critical resources would have been available.

This research provided several conclusions regarding XXXXXX Corporation’s Legal Compliance Department paralegals and their exemption status under the FLSA.  First, these particular paralegal employees are quasi-specialists, and cannot be construed as typical paralegals working in other legal venues. Second, these employees are normally engaged in duties that easily fall under the FLSA’s “white-collar” exemption, specifically under the administrative duties category. Lastly, various types of “Paralegal Specialists” are becoming more commonplace, as employers realize the cost effective benefits of paralegal utilization and engage these employees in tasks that do not require an attorney’s efforts.

“Legal compliance” has increasingly assumed a greater role in traditional business stratagem. In light of some of the more rigorous compliance standards that have been enacted in the past decade, such as the Sarbanes-Oxley Act or the Graham-Bleach-Bliley Act, corporations in the 21st century clearly understand the significance of compliance.

XXXXX Corporation’s Legal Compliance Department has become responsible for a number of specific areas, including forms compliance, DOI regulation, legislative and litigation tracking, and business practice advisement.  Insurance is an exceedingly regulated industry, and the need for an internal department to act as a guide in these areas is crucial.

The Legal Compliance Department’s paralegals are consistently engaged in activities that are not typically part of paralegal practice. Paralegals employed in most corporate legal departments are engaged in the tasks involved with litigation. The Legal Compliance Department has instead served as a type of preventative legal function for XXXXX Corporation. By consistently identifying potential risk, actively learning of new risks for litigation as identified by XXXXX Corporation’s competitors, and by providing counsel for management, the Legal Compliance Department has been at the forefront of reducing the risk of future litigation or regulatory intervention. In this way, the department’s work is much less procedural and finite than the legal work typically part of litigation. Because of this difference, paralegals in the Legal Compliance Department are continuously engaged in work that is more abstract, and as a result, cannot be gauged by a timeline. An example of such work is universal research projects, typically encompassing months of effort. Tasks involved with a typical universal research project include determining the legal viability of a specific business practice, recommending changes to a supervising attorney, and after receiving a supervising attorney’s approval, acting as a contact during the implementation process.

The abstract work performed by the Legal Compliance Department’s paralegals conform to the Department of Wage and Hour’s interpretation of an exempt employee’s work. According to the historical summary of the FLSA, in the revised Part 541, “the type of work they [exempt employees] performed was difficult to standardize to any time frame and could not be easily spread to other workers after 40 hours in a week, making compliance with the overtime provisions difficult and generally precluding the potential job expansion intended by the FLSA’s time-and-a-half overtime premium”( Department of Labor, 2004 ). 

XXXXX Corporation’s paralegal employees serving within this Legal Compliance Department have fulfilled various responsibilities within this preventative compliance process. Examples include the following:

  •    Legal Environment Tracking: Researching current activities and events occurring in the areas of litigation, legislation, and business practices. Identifying appropriate members of the organization to communicate these current trends with, and relaying the continuing stream of information for necessary action. This type of competitive research has prompted increased awareness of current trends on the industry horizon. As a result of such information, necessary changes have been implemented in various company functions.
  • Legal Research: After learning of potential risks, research is conducted internally, often across multiple departments, in order to develop a sound viewpoint regarding XXXX Corporation’s business practices. Case law, statutory law, and competitor’s business practices are identified in order to provide conclusive resolution to the long-standing question: “What is XXXX Corporation’s exposure?” After the research conclusions are summarized, they are reviewed and approved by supervisory attorneys, prior to changes being implemented.
  • Licensing:  Research, preparation, and submission of both new XXXXX Corporation licenses, or updated/renewal licenses. Staying abreast of changes within the business, necessary revisions are identified, and specific procedures are followed for implementation. Often involved in researching XXXXX Corporation licenses for business purposes, such as identifying the appropriate licensed producer for a hybrid business operation, or researching/job costing of licensing vendors in order to obtain new licenses in a more time-efficient manner.

Discretion and Independent Judgement

 In order to qualify for the Part 541 exemption, employees must be further categorized as Professional, Administrative, or Executive employees. In the past, the Department of Labor’s Wage and Hour Division has issued several statement letters regarding paralegal workers. The greatest argument has always been for paralegal exemption under the professional category. Many paralegals feel that their specialized education, training, and job skills provide them with the necessary ammunition to claim exemption as a learned professional. Unfortunately, due to the lack of standardization within the paralegal profession, this attempt to brushstroke paralegal employees into a legal, professional category has not been embraced.

XXXXX Corporation’s Legal Compliance Department Paralegals fall under the administrative category of Part 541. In the past, the Wage & Hour Division has also struck down this possibility for paralegals, by inciting a theorem based on a paralegal’s job duties and the unauthorized practice of law. Specifically, in the Opinion Letter issued by the Division in 1977, it was agreed that a paralegal worker could not receive exemption, except under the administrative employee capacity. Then, in order to strike down this possibility, the Division issued the following declination:

         “It is our further position that ‘legal assistants’ and ‘paralegals’ generally are not involved in the performance of duties requiring the exercise of discretion and independent judgment of the type required by section 541.2; they are, instead, involved in the use of skills rather than discretion and independent judgment. In our view, such employees generally are found to be highly trained and highly skilled specialists who, as such, would not qualify for the exemption as defined….in Regulations, Part 541.5” (Rodriguez, 2002).

 Unfortunately, each of the Department of Labor’s opinion letters regarding paralegal exemption only considered paralegals working in positions specific to litigation. While considering paralegal employees under the administrative, exempt employee category, the Wage & Hour Division found that “traditional legal assistant duties such as preparing oral presentations or meeting and interviewing clients do not involve the exercise of discretion and independent judgment”(Rodriguez, 2002). In the Department of Labor’s “most recent opinion letters, legal assistant duties such as drafting pleadings, discovery requests and letters to clients, performing legal research, cite-checking briefs, preparing trial material and dealing with clients and witnesses, represent duties that involve the application of skills and knowledge rather than discretion and independent judgment” (Priest, Coleman; 2004).

The DOL’s paralegal decision is not specific to XXXXX Corporation’s Legal Compliance Department Paralegals. Only one of the job duties above – “performing legal research” – could be attributed to these specific XXXXX Corporation employees. The rest of the tasks are only attributable to paralegal employees either working in the Claims Department or in Litigation.  

The Department of Labor’s interpretation of the FLSA provides that a number of factors must be considered when analyzing an employee’s use of discretion and independent judgment. No criteria have been set for how many of the factors must be utilized to meet exempt status. The factors considered by the DOL include:

  • “Whether the employee has authority to commit the employer in matters that have significant financial impact;
  • Whether the employee has authority to waive or deviate from established policies and procedures without prior approval;
  • Whether the employee performs work that affect business operations to a substantial degree” (Snider, 2004).
  • “Whether the employee has authority to formulate, affect, interpret or implement management policies or operating practices;
  • Whether the employee carries out major assignments in conducting the operations of business;
  • Whether the employee has authority to negotiate/bind the company on significant matters;
  • Whether the employee provides consultation or expert advice to management;
  • Whether the employee represents the company in handling/ resolving grievances or in arbitrations”(Borgen, 2004).

XXXXX Corporation’s paralegal employees in the Legal Compliance Department arguably do not participate in a number of the above scenarios. However, tasks performed by Legal Compliance paralegals do fall into several of the categories above – “whether the employee performs work that affects business operations to a substantial degree”(Snider, 2004); “whether the employee has authority to formulate, affect, interpret or implement management policies or operating practices”; “whether the employee carries out major assignments in conducting the operations of business”; and “whether the employee provides consultation or expert advice to management”(Borgen, 2004). Examples of tasks that fell into one of the above referenced categories include:

  •   Fair Credit Reporting Act (FCRA) case law research: Research of recent case law  against XXXXX Corporation competitor. Located specific market/business practice issues called into question by the court. Identified similar issues with XXXX Corporation practices/forms. Submitted findings/recommendations to supervising attorney, who then led effort to implement internal changes based on research conducted.


  •   Spanish Forms Translation:  Research of applicable state statutes and case law,  supporting supposition that legal conflicts may exist with consumer forms translation. Research of XXXXX Corporation’s competitor experiences with translating consumer forms. Identified necessary components of a reputable translation service. Submitted findings/recommendations to supervising attorney. Upon review, supervising attorney counseled the organized business team on conclusions of law.


  • XXXXX Corporation competitor’s financial reports:  Upon filing of SEC financial statements, either year-end reports or quarterly statements, review is made of  competitors’ documents. Research, composed of competitor’s reported legal issues, is compiled and compared to previous compilations. New issues are identified, and the natural progression of competitor’s cases and regulatory proceedings are also noted. Findings are submitted to supervising attorneys, noting new elements of risk in the litigation environment. Potential future issues requiring compliance scrutiny are also identified.

Reich v. Page & Addison LLC

The Department of Labor suffered a huge blow to their opinion on administratively exempt paralegals in 1994. In Reich v. Page & Addison, the Department of Labor used their limited resources to prosecute in their attempt to allege that Page & Addison, LLC, had improperly designated their paralegal employees exempt. “The Department of Labor slapped a federal lawsuit on the firm – an action only infrequently taken due to financial constraints. But it’s safe to say, when the Department of Labor does take the time and expense of going to court, one of it’s primary intentions is to broadcast a message to the rest of the industry in question”(Ritter, 2002).  A Dallas jury in the United States District Court in the Northern District of Texas agreed with the law firm, and found the paralegals in question to be exempt. All of the Page & Addison, LLP paralegals were found to exercise independent judgment and discretion when they performed their duties and fulfilled their responsibilities, even though a supervisory attorney must approve or reject the paralegals’ work. “A key to the successful defense was the virtually unanimous support the firm received from its legal assistants who resented the department’s attempts to characterize them as (in their own words) ‘glorified secretaries’ (Priest, Coleman; 2004). Another article summarizing the activity behind Reich v. Page & Addison described the Deparment of Labor’s loss as follows:

Smarting from that decision, the government appealed to the 5th U.S. District Court of Appeals; then, six months later, the Department of Labor did something that remains a mystery to this day, it dropped the appeal. Why? Did the Department of Labor’s move signal an abandonment of its long-standing position that the majority of legal assistants must be paid overtime? No one at the Department of Labor was willing to go on the record about the dropped appeal, except to say that nothing in the agency’s decision should suggest a change of heart. And, in fact, the labor department continues to pump out administrative rulings, some stating paralegals generally don’t qualify for any of FLSA’s exemptions”(Ritter, 2002).

Since the Page & Addison decision, each opinion issued by the DOL regarding the issue has only focused on paralegals’ inability to claim status under the professional exemption. In regards to the administrative exemption, the DOL will only state that paralegals “are generally” not exempt. 

Attorney Supervision

The Department of Labor had previously asserted that American Bar Association standards regarding the unauthorized practice of law restricted a paralegal’s ability to claim exemption under Part 541. In their belief, a paralegal, by definition an employee under the supervision of an attorney, could not exercise the amount of independent judgment and discretion required of an administratively exempt employee.

           “Delegating 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. The implication of such strictures is that [a legal assistant] would probably not have the amount of authority to exercise independent judgments with regard to legal matters necessary to bring them within the administrative exemption’”(Rodriguez, 2002).

This seems to be the strongest argument against paralegal exemption. Following this theory, the amount of supervision required by an attorney negates any possibility that the decisions made by paralegals require enough discretion and independent judgment. Unfortunately, this argument fails on several grounds. 

First, the amended FLSA “white-collar” exemption standards now allow an administratively exempt employee to be supervised. “The regulations state that exercise of judgment/discretion is not negated by the fact that the employee’s decision making may not be final or unlimited. Some review by higher authority may be tolerated, even if decisions are ‘upon occasion’ revised or reversed after review”(Borgen, 2004).

As the FLSA seems to allow administratively exempt employees to make decisions under the general guidance of a superior, the real question lies in the degree of supervision that an attorney is required to give while overseeing a paralegal’s work product. A recent Oklahoma Bar Journal article supports the theory that an attorney can exercise enough diligence in their supervision of non-attorneys, that those non-attorneys may still exercise enough discretion and independent judgment to claim exemption status:

    “ The revised administrative exemption also relaxes the earlier requirement that employee decisions be free from  immediate supervision. It indicates that employees can  exercise discretion and independent judgment even when their decisions are reviewed at a higher level. Accordingly, legal assistants could exercise the requisite discretion and independent judgment even where their decisions are reviewed by supervising lawyers, as they must be under the Rules of Professional Conduct. Legal assistants were found to utilize discretion and independent judgment in Reich. There, the jury found that legal assistants exercised the requisite discretion and judgment to qualify as exempt”(Priest, Coleman; 2004).  

In fact, the general supervision required of an attorney, by law, does not seem to override the assertions made by many employers, that their paralegal employees exercise enough discretion and independent judgment to render them exempt. According to NFPA’s (National Federation of Paralegal Associations) 1999 Report, the industry is nearly equally divided on the exempt vs. non-exempt question. In the corporate legal environment, the proportion of exempt v. non-exempt paralegal employees is very different. “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” (Martin-Bowen, n.d.).

The American Bar Association has issued statements supporting the preposition that a paralegal’s work is substantive in nature. The following definition of paralegals and legal assistants was issued within the ABA’s Standing Committee on Legal Assistants’ position paper on the “Question of Legal Assistant Licensure or Certification”:

           “[A] person, qualified through education, training, or work experience, who is employed or retained by a lawyer, law office, governmental agency, or other entity in a capacity or function which involves the performance, under the ultimate direction and supervision of an attorney, of specifically-delegated substantive legal work, which work, for the most part, requires a sufficient knowledge of legal concepts that, absent such assistant, the attorney would perform the task”(Meckler, B.R., Leigh, M.; 2004).

This ABA opinion, reflecting on the substantive nature of paralegal work, is also upheld in case law.  In Missouri v. Jenkins (491 U.S. 274 (1989))¹, the U.S. Supreme Court upheld an award of attorney fees that included a stipend for paralegal time at “market rate”. Ever since this formulative case decision, the law has been consistently questioned about this decision. Specific to this research is the question, “What types of tasks can a paralegal be compensated for, through court-awarded attorney’s fees?”

              “Parties have debated whether the time reported by paralegals is non-reimbursable clerical time. In determining whether paralegal time reimbursable, the court in In re CF&I Fabricators of Utah, Inc.², referred to the definitions of a paralegal provided by the American Bar Association Standing Committee on Legal Assistants and the National Association of Legal Assistants, which provided that paralegal work is substantive legal work that is performed under the supervision of an attorney. In In re Busy Beaver Bldg. Ctrs., Inc.³, the court held that paralegals were to be compensated for tasks ‘involving the exercise, or potential exercise, of some paraprofessional judgment.’ However, it considered services not requiring the exercise of professional legal judgment to be non-reimbursable as clerical expenses in overhead”(Meckler, B.R., Leigh, M., 2004; see also Rodriguez, 2002).

¹ Missouri v. Jenkins by Agyei, 491 U.S. 274, 109 S.Ct. 2463.

   Jun.19, 1989 (Approx. 13 pages).

² In re CF & I Fabricators of Utah, Inc., 131 B.R. 474
   Sep 18, 1991 (Approx. 27 pages)

³ In re Busy Beaver Bldg. Centers, Inc. , 19 F.3d 833
  Mar 11, 1994 (Approx. 29 pages)

Clearly both the court and the ABA seem to rigorously defend paralegal duties in the legal environment. The ABA defines paralegal work as tasks of substantive legal involvement that would normally be accomplished by an attorney.

Case law supports the award of paralegal fees as part of attorneys’ fees, and states that only tasks requiring “paraprofessional judgment” can be reimbursed. Clerical tasks cannot be reimbursed through such award.

In the National Association of Legal Assistants’ (NALA) Corporate Human Resources Guide To The Legal Assistant/Paralegal Profession”, an extremely concise depiction of corporate paralegals is given. This description not only explains the ABA opinion of paralegals, but also expresses the intentions of illustrated case law. For the audience of Human Resources professionals, NALA also offers explanations about the typical utilization of paralegals in a corporate environment, and the cost-effectiveness of doing so. The most specific language used in the NALA guide is the depiction of attorney  supervision of paralegal employees. Please see the excerpt from NALA’s Corporate Human Resources Guide below:

                “Over the past 25 years other associations, for instance, the American Bar Association, have developed their own definitions of “legal assistant/paralegal” and much has been written as to what duties are appropriately delegated to legal assistants. All agree that legal assistants/paralegals perform work which is of a substantive nature, requiring education, knowledge and expertise, distinguishing it from that which is clerical or rote. Case law relating to legal fees has been consistent in requiring that the task performed by the legal assistant be that which an attorney would do if the legal assistant had not been available—not work traditionally done by secretaries or clerks.

               Legal Assistants do work which requires substantive legal knowledge, creativity in problem solving and independent judgment, but always under the supervision of a lawyer. The nature and amount  of supervision required lies within the lawyer’s discretion. Legal assistants/paralegals cannot ethically set fees, accept or reject clients, represent clients in court, or give legal advice. Yet, legal assistants may, and do, exercise independent judgment within established parameters…

               An in-house legal assistant acquires knowledge that is invaluable to both internal attorneys and outside counsel, which, in turn, allows matters to be handled efficiently and cost effectively. Corporate legal assistants become extremely familiar with the organization of the company, its goals, priorities, and products, and can accumulate, analyze and summarize data and facts from an insider’s perspective. From such insight legal assistants can quickly determine the appropriate persons to contact to obtain specific information, saving time and money when working with outside counsel in preparing and responding to discovery requests in litigation.

             Experienced legal assistants with in-house knowledge work not only in the legal department but are found in a variety of positions throughout a corporation: contract administrator, corporate procurement, patents or corporate secretary to name a few”(National Association of Legal Assistants, 1999).


Paralegal employees are being consistently utilized for various capacities, as employers realize the benefit of a legal background. These legal workers are no longer just attorney support – they are filling positions as management or as consultants in law firms, corporations and government agencies.

Several resources consulted for this research all agree that “paralegals work quite autonomously, exercising a good deal of independent judgment in performing their work. (Cannon, 2002). Although unauthorized practice of law statutes specifically prohibit nonlawyers from appearing in court on behalf of a client, establishing the attorney-client relationship, or from giving legal advice, many tasks can be legally fulfilled by a paralegal employee (Cannon, 2002).

The amount of paralegal supervision required of an attorney depends on the nature of the work assigned, along with the paralegal’s qualifications and skill set. Some paralegals, depending on the field they are involved, are unable to claim exemption under the FLSA due to the ministerial, procedural nature of their work. This is especially true of paralegals involved in litigation. However, paralegals involved in other legal specialties can claim exemption, if their tasks require independent judgment and discretion, and the employee does not require undue supervision by an attorney (Segal, 2004).


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Department of Labor (D.O.L.) Wage & Hour Division.(2004, April 23). Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees. 69 FR 22122.

Johnson, R.E. (2003). Don’t Eliminate Overtime Pay. Legal Assistant Today. Retrieved

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Martin-Bowen, L.(n.d.) To Pay or Not to Pay: That’s a Good Question. National Federation of Paralegal Associations: Professional Development article. Retrieved March 27, 2005 from                                                                                                                                          


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         2005 from

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Segal, J.A.(2004, Dec). White-collar wrinkles: don’t let the new FLSA regulations leave you steamed. Retrieved March 28, 2005 from

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Vorys, Sater, Seymour & Pease LLP. (n.d.) The Paralegal Program at Vorys, Sater, Seymour and Pease LLP. Retrieved March 28, 2005 from

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One Response to “Paralegals: FLSA Exemption Applicability”

  1. Aaronsburg lawyer Says:

    Regardless of the disposable options competency is an important challenge inside legal arena .

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