Overtime Advisor : New York Employment Lawyer & Attorney : Greenwald Doherty Law Firm : NY Wage & Hour & Discrimination : Overtime Advisor Law Blog

In this case, Renata Magnoni, earned upwards of $65,000.00 a year as a paralegal at Smith & Laquercia, a Manhattan law firm. Magnoni’s suit claimed she was entitled to between six and eight hours of overtime worked per week for the six years preceding her April, 2007 termination. Since she was a paralegal, and paralegals are usually non-exempt, it would seem that Magnoni had an open and shut case.

The wrinkle is that during her employment Ms. Magnoni had also operated a legal process service business, Contessa Legal Process, on the side and her employer, Smith & Laquercia, was a client of her business. As sole proprietor of Contessa, Magnoni was directly paid by Smith & Laquercia for services provided by Contessa. In the two years prior to her termination, the money Contessa received from Smith & Laquercia coupled with Magnoni’s salary exceeded $100,000. Tellingly, Smith & Laquercia did not take taxes out of the money it paid to Magnoni for her process serving and court filing services as it did for her employee wages.

Arguing that Magnoni was not eligible for overtime under the highly-compensated employee exemption (looking at the total amount it paid to Magnoni), Smith & Laquercia moved for summary judgment on Magnoni’s overtime claims. The Court’s basis for denying summary judgment to Smith & Laquercia was straightforward enough: Magnoni did not earn $100,000.00 for her work as a paralegal, and the compensation she received while wearing her independent contractor hat did not count for purposes of the exemption. The Court tossed aside the Firm’s broad reading of “compensation,” stating that it would be “antithetical to the spirit of the FLSA to consider payment received as an independent contractor to constitute ‘employee’ compensation . . . .”

Cases involving such entrepreneurial paralegals are probably few and far between. Even so, Magnoni provides a useful reminder to law firms that paralegals are most likely non-exempt and should be paid overtime wages when they work more than 40 hours in a work week. While the highly compensated employee exemption might be a useful tool in resisting an overtime claim, the employee’s total annual employee compensation must be $100,000.00 or greater – without considering income from separate non-employee roles.
 

First, the guidance: The plain language of the regulation requires employees to have certain “advanced knowledge” which is “customarily acquired by a prolonged course of specialized intellectual instruction.” The Court determined that on-the-job training was not sufficient to satisfy the requirement in this case, despite the word “customarily.” While there are rare situations, such as the lawyer who studies under a mentor and then is permitted to take the bar exam, most lawyers customarily go to law school (i.e., partake in a prolonged course of specialized intellectual instruction). Here, no engineer in the position under consideration had a college degree. Furthermore, a bachelor’s degree was not even a requirement of the job. Thus, the Court determined that this engineering position could not qualify for the professional exemption. No one in that position “customarily” had an advanced degree and education. Thus, the plaintiff was entitled to overtime compensation.

Next, the concern: This employee was first offered a non-exempt position and declined, seeking higher wages. The company then offered him a similar engineering position that was considered to be exempt from the overtime requirements that paid a higher wage. The employee accepted—then after three years of employment, claimed that the offer of the second job (with duties virtually identical to the non-exempt position initially offered), was a conscious effort to avoid paying overtime wages. The Court agreed and confirmed the lower court’s finding that the employer’s actions to avoid overtime pay were willful (despite efforts the company had allegedly taken to evaluate the positions), extending the statute of limitations from two to three years (see 29 U.S.C. § 255(a)).  Indeed, though the positions might have appeared different on paper, it was determined that what this employee actually did was the same as the lower-level job.

Employers should be mindful of the effect job requirements have on proper job classification for overtime wage purposes, and that a court will look at what employees do—not at what their job description says. The result, as here, could be hefty liability for overtime wages.