A college diploma does not guarantee exempt status under the Fair Labor Standards Act (FLSA). Neither does a master of business administration (MBA) or passing a professional licensing examination, according to the U.S. Department of Labor in an opinion letter.
But having a sheepskin does help establish exempt status under the learned professional exemption if it is a standard prerequisite for a position and linked with the employees main duty.
The opinion letter (FLSA2005-54, released Jan. 4, 2006, and dated Dec. 16, 2005) responded to exemption questions pertaining to a law firm whose paralegals could mount an impressive array of degrees on its walls.
One paralegal had an MBA in general business, a bachelor of business administration degree in accounting and an associate of applied science in legal assistant technology. She also passed the uniform certified public accountant exam. Four of the five other paralegals had college degrees, and two were certified legal assistants.
The FLSA regulations state that paralegals and legal assistants generally do not qualify as exempt learned professionals. The DOL was asked whether this statement is conclusive, as the rule is conditioned on the educational and professional background of each paralegal.
In response, the DOL clarified that paralegals generally do not qualify for the learned professional exemption because an advanced specialized academic degree is not a standard prerequisite for entry into the field.
But the exemption is available when a paralegal has an advanced specialized degree in other professional fields and applies advanced knowledge to his or her primary job duty. For example, if a law firm hires an engineer as a paralegal for expert advice on product liability cases or to assist on patent matters, that person could qualify for the exemption.
Similarly, if a paralegal with an MBA, accounting degree and CPA license performs primarily expert work in her advanced fields, she may qualify for the exemption. But the primary duties of the law firms paralegal with an MBA and CPA credentials appear to be those of a conventional paralegal, the DOL observed.
In fact, none of the law firms paralegals performed, as a primary duty, work that required advanced knowledge from a prolonged course of specialized intellectual instruction at the level intended by the FLSA regulations, according to the DOL.
Independent judgment?
Nor did the employees exercise discretion and independent judgment to qualify for the FLSAs administrative exemption.
The agency outlined factors to consider in determining whether an employee exercises discretion and independent judgment in significant matters. These factors include whether the employee:
Has authority to formulate, affect, interpret or implement management policies or operating practices.
Carries out major assignments in conducting business operations.
Performs work that affects business operations to a substantial degree, even if the assignments are related to the operation of a particular segment of the business.
Has authority to commit the employer in matters that have significant financial impact.
May waive or deviate from established policies and procedures without prior approval.
Has authority to negotiate and bind the company on significant matters.
Provides consultation or expert advice to management.
Is involved in planning long- or short-term business objectives.
Investigates and resolves matters of significance on behalf of management.
Represents the company in handling complaints, arbitrating disputes or resolving grievances.
Federal courts generally find that employees who meet at least two or three of these factors are exercising discretion and independent judgment, although a case-by-case analysis is required, the DOL stated.
But the paralegals did not meet this threshold.
Under the American Bar Associations Code of Professional Responsibility, a delegation of legal tasks to a layperson 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. Consequently, the firms paralegals would not have the amount of authority to exercise independent judgments on legal matters to bring them within the administrative exemption, the DOL concluded.
Allen Smith, J.D., is senior legal editor for HR News.
Related articles:
DOL continues to clarify FLSA coverage in opinion letters, HR News, Dec. 15, 2005.
Overtime exemptions for white-collar employees: New regulations clarify status, Legal Report, May/June 2004.
For the latest HR-related business and government news, go daily to www.shrm.org/hrnews
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