Are Contract Attorneys Practicing Law — and Thus Exempt from Overtime Pay Requirements — When Reviewing Documents?
Many law firms, especially larger firms, use contract attorneys for large document review projects. Some firms hire contract attorneys directly while others use legal staffing agencies to provide these attorneys on an as-needed basis. Given the current job market, many attorneys move from one contract assignment to another to find work. A study revealed that over 50% of law firms nationally use contract attorneys, including almost 80% of firms with 250 or more attorneys.
A recent ruling by the U.S. Court of Appeals for the Second Circuit should cause any such firm to carefully review its practices. Lola v. Skadden, Arps, Slate Meagher & Flom et al, 2015 WL 4476828 (July 23, 2015).
The named plaintiff, David Lola, reviewed documents in North Carolina for Skadden, a New York based firm (with over 1,700 attorneys worldwide), in connection with a multi-district litigation pending in Ohio. Lola was admitted to practice in California but not in North Carolina or Ohio. According to Lola, his work was closely supervised and his entire responsibility consisted of i) looking at documents to see if any search terms appeared in them; ii) marking those documents into predetermined categories; and iii) at times drawing black boxes to redact certain documents based on protocols the firm provided. The firm gave him the documents to review, the search terms to use, and the procedures to follow if search terms appeared. He worked about 45 to 55 hours per week, was paid $25 per hour for every hour worked, and was not paid overtime. Id. at *1.
The Second Circuit explained that attorneys — even if paid on an hourly rather than a salaried basis — are not entitled to overtime pay under the Fair Labor Standards Act. This is because the relevant regulation (29 C.F.R. § 541.304) exempts from the overtime requirement, “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.” Id. at *2.
In this case, the issue, therefore, was whether Lola was “practicing law” or not when reviewing the documents. In applying North Carolina law, the Second Circuit concluded that the district court erred in holding that engaging in document review per se constitutes practicing law in that state and rather that the exercise of some level of legal judgment is an essential element of the practice of law. In reviewing Lola’s complaint, the Second Circuit explained that he alleged he performed document review “under such tight constraints that he exercised no legal judgment whatsoever–he alleges he used criteria developed by others to sort documents into different categories.” Id. at *6. Further, at oral argument in the district court, the parties agreed that “an individual who in reviewing discovery documents performs tasks that could otherwise be performed entirely by a machine cannot be said to engage in the practice of law.” Id. Based on all this the Second Circuit remanded the case to the district court for further proceedings.