Whether employees are exempt from overtime compensation under the Fair Labor Standards Act (FLSA) and similar state laws continues to be a major issue for employers across many industries. The United States District Court for the Southern District of New York recently weighed in on this debate, holding that contract attorneys who reviewed documents for the mega law firm Skadden, Arps, Slate, Meagher & Flom (Skadden) were considered “professional” employees under the FLSA because they practiced law and, therefore, were not eligible for overtime pay for hours worked more than 40 in a work week. Lola v. Skadden, Arps, Slate, Meagher & Flom, No. 13-cv-5008 (S.D.N.Y. Sept. 16, 2014).

Tower Legal Staffing (Tower) hired plaintiff David Lola (Lola) to work on a document review project for Skadden. Lola worked on the project for 15 months, reviewing documents in North Carolina in connection with a multi-district litigation Skadden handled. Lola’s work consisted of reviewing documents involved in the litigation for relevance and privilege, and redacting them as necessary. For his services, Tower paid Lola $25 per hour and he worked between 45 and 55 hours per week, with no overtime pay for work over 40 hours.

The primary issue the Court considered was whether Lola — and other attorneys similarly situated — should have been paid overtime after 40 hours per week. Lola argued that, while he is a licensed attorney, the work he and others performed was not “practicing law,” and thus he was a non-exempt employee of Skadden and Tower entitled to overtime pay.

Skadden filed a motion to dismiss on the grounds that Lola was exempt from the overtime provision of the FLSA as a professional employee — a licensed attorney engaged in the practice of law. Skadden also argued that Lola was not a Skadden employee because Tower actually employed him. As to the practice of law, Skadden argued that reviewing documents in connection with pending litigation is a core function performed by attorneys on a daily basis that requires attorneys to use their legal training. Lola responded that his work should not be considered as practicing law because it was mechanical in nature and did not involve the use of any legal judgment or discretion.

The Court, applying North Carolina law because Lola performed the document review there, sided with Skadden on the issue of whether Lola was “practicing law.” The Court did not reach the issue of whether Skadden employed Lola or Tower employed Lola, thus leaving that issue open.

In finding that Lola practiced law, the Court first analyzed the definition of “practice of law” under North Carolina law, which is:

performing any legal service for any other person, firm or corporation, with or without compensation, specifically including ... the preparation and filing of petitions for use in any court, including administrative tribunals and other judicial or quasi-judicial bodies, or assisting by advice, counsel, or otherwise in any legal work; and to advise or give opinion upon the legal rights of any person, firm or corporation

N.C. Gen. Stat. § 84-2.1 (emphases added).

The Court then looked to the North Carolina State Bar’s Formal Ethics Opinion regarding whether a lawyer may ethically outsource legal services abroad. The Bar’s Ethics Committee responded that, “A lawyer may also use foreign assistants for limited legal support services such as reviewing documents; conducting due contracts, pleadings, and memoranda of law; and conducting legal research.” Relying on the fact that the Bar had put reviewing documents in the same category as conducting legal research, which is undoubtedly the practice of law, the Court reasoned that the Bar Ethics Committee had concluded that reviewing documents is, in fact, the practice of law. This fact, coupled with the broad definition of practicing law, led the Court to conclude that reviewing documents is covered in that definition.

The Court also explained that simply because Lola had exercised little to no discretion in reviewing the documents did not mean that he was not performing legal services. In a slight jab to the junior associates of the law firm world, the Court wrote:

Even undisputedly legal services like the drafting of motion briefs and the negotiating of documents require the performance of tasks — checking cases to make sure quotations are accurately reproduced, conforming citations to the stylistic dictates of the Bluebook, ensuring that documents are free of grammatical and typographical errors — that require little to no legal judgment. As junior associates at law firms well know, these tasks are the bread and butter of much legal practice and essential to the competent representation of clients.

Last, the Court recognized that this outcome, while perhaps viewed as harsh to some, could always be taken up by Congress or the Department of Labor. It wrote: “To the extent that this result is unwise or unfair, especially in light of the employment prospects that many licensed attorneys now face, Congress and the DOL remain free to revisit the regulation or to promulgate a uniform federal standard that more narrowly defines the ‘practice of law.’” Until they do so, however, the Court noted that it is constrained to apply the definition of “practice of law” that is prevailing in North Carolina.

There are a number of issues that the Lola case raises. First, it should be noted that the Court applied the state law where the reviewer is located. Thus, the particular state law of a document review project is critical in determining whether a contract attorney is entitled to overtime compensation. Second, this case is not controlling on all document review projects, even in North Carolina. Third, the case could still be appealed to the Second Circuit, so it is unlikely that this is the final word on the issue.