A local attorney being considered for a vacancy on the 10th Circuit Court of Appeals has settled quietly with the federal government after being investigated for failure to pay his employees overtime wages.
The U.S. Department of Labor settled out of court with attorney Dan Berman for an undisclosed sum last month, days before government lawyers were going to file a formal complaint against Ber-man in federal court, a Department of Labor attorney said.Berman and Utah Supreme Court Justice Christine Durham are under consideration by the White House for the vacancy on the 10th Circuit Court of Appeals created by Judge Monroe McKay's retirement. The White House is expected to announce its nominee any day.
But Utah Sen. Orrin Hatch, ranking Republican on the Senate Judiciary Committee, said the government investigation and out-of-court settlement won't hurt Berman's chances of being named to the federal appeals court. "A lot more serious accusations have been made against other judges than that. This doesn't even rise to the dignity of an accusation," Hatch said. He often sees confidential files containing more serious allegations.
But this is at least the third time questions over the way Berman compensates his employees have resulted in an unfavorable court ruling or government decision for Berman.
As a result of the recent inquiry, Berman will pay thousands of dollars to several employees who should have received the money before, according to some of the employees who will be receiving the money. Berman also will change the way he pays his secretaries, bookkeepers and paralegals for their overtime work, he said.
Neither Berman nor government officials would say how much he settled for. "I don't want to disclose the amount of the settlement. I feel that is private," Berman said. But the settlement was "far less" than the employees were asking for, he said.
Berman said the settlement involved no admission of wrongdoing on his part. The settlement compensates unpaid employees for overtime accrued while working at Berman & O'Rorke and Berman, Gaufin & Tomsic, his current law firm.
Berman has been ordered by a court or government agency to compensate employees at least twice before.
In June 1992 paralegal Steve Hewlett took a three-day vacation. He had his supervisor's permission for the vacation but not Berman's, he said. On the first day of vacation, "Dan fired me because I wasn't there. They called and left a message on my answering machine telling me I was fired."
The company still owed Hewlett several days of vacation pay. Hewlett asked for it, but Berman refused to pay it. Hewlett filed a complaint against Berman in small claims court, according to court records obtained by the Deseret News.
A judge heard the case and awarded Hewlett $343 in vacation pay.
Paralegal Mary Adamson also was fired on her first day of vacation, she said. Attorney Patricia O'Rorke called Adamson at home on Father's Day and fired her for failing to move some files for O'Rorke, Adamson said.
The company also owed Adamson five days of vacation but refused to pay it, she said. She filed a complaint with the Utah Industrial Commission. In December 1992, the commission ruled in her favor, instructing Berman's firm to pay the vacation time. The firm cut Adamson a check two days later.
Berman said he is unaware of these situations. "I'm not even sure I know Mary Adamson. She worked for someone else in the office. I don't know about those facts."
Berman says the Labor Department investigation settlement underscores a national debate over overtime pay for paralegals. The debate focuses around the question: Are paralegals professionals under federal law?
"We paid our paralegals straight time, not time and a half. But we had a very good legal position that we didn't owe them any overtime because they were professional employees," Berman said.
Berman said he genuinely believed that under the federal definition, paralegals are pro-fes-sion-als. He points to a recent Texas case, where a judge came to the same conclusion.
"The Department of Labor has been losing this issue in court," Berman said, citing the Texas case. Although Berman has changed the way he pays paralegals as a result of the department's investigation, he still believes paralegals are professionals and do not deserve overtime, he said. "I don't believe that's the law, and it's clearly not the way things are going in the courts."
"I'm sure that case will be appealed. It was a very bad decision," said Ruth Bauman, district director of the Wage and Hour Division of the U.S. Department of Labor. The department believes a wage established 20 years ago should not be used now to determine whether someone is a professional who doesn't merit overtime.
Despite his differing opinion of the law, Berman has known for several years the government may require him to pay overtime to paralegals and secretarial staff.
In 1989 - three years before the Department of Labor's investigation - an attorney at Berman's firm wrote a 14-page memo outlining the legal reasons the law firm needed to pay overtime.
The Jan. 26, 1989, memo, drafted by attorney Judy Brown, urged the law firm to immediately begin paying overtime. "Given the criminal penalties and civil liabilities for noncompliance with the Fair Labor Standards Act, I would recommend the firm take the following steps immediately," Brown wrote. She urged the firm to begin immediate overtime compensation and make bookkeeping changes necessary to comply with the law.
The memo addresses Berman's argument about the professional exemptions but concludes, "Of the firm's employees, only the attorneys would qualify under any of these exemptions."
The memo disappeared off Brown's computer shortly after she drafted it and gave it to partner Peggy Tomsic, three former employees of the firm have told the Deseret News.
Berman says he doesn't remember seeing the memo. "I know about it now, but I don't recall reading it at the time. But I remember being of the opinion that paralegals weren't entitled to overtime."
Before the settlement, Berman's firms paid paralegals and secretarial staff straight time for some of the overtime hours they worked. The rest of the hours weren't paid at all, Hewlett said.
"They would say, `You worked 80 hours of overtime, we'll pay you for 30.' " Hewlett said. The employees were only paid straight time - not the required time and a half - for the overtime hours.
"If Dan made money on a case, maybe the paralegals got overtime pay. But that was always the bottom line: Did Dan make money."
As part of the settlement, the Department of Labor this spring required Berman to change the way he pays overtime to his paralegals. But ironically, the settlement means Berman now pays his paralegals less than he paid them before.
The federal government gave Berman two choices: Pay time and a half for overtime or put his paralegals on fluctuating schedules, working fewer hours some weeks and more others. Under that arrangement, a paralegal would be paid for 40 hours a week whether he worked that many hours or not. But he would only be paid half-time for overtime worked.
He is now paying paralegals half-time for overtime worked, rather than time and a half. "We were willing to pay straight time and be left alone. But since the Department of Labor wanted to do it this way, now it's half-time. This is what the rules are," Berman said.
"It was less than what we were doing. Why they did that, you've got me," Berman said.
If Berman is truly paying his employees less, the department may reopen its investigation, Bauman said.
Companies can change the way they pay employees to comply with the law, but that method can't result in an overall pay cut for employees, she said.
"If he has reduced their wages in order to come into compliance, then he's violating the law," Bauman said. "We won't let companies do that. It defeats the purpose of the investigation."
When asked again about paralegal salaries, Berman said he is "absolutely" paying paralegals less if those paralegals put in overtime.
"If that is indeed what he is doing, this is a serious problem we can't ignore. He's laughing at the law," Bauman said.
The White House is aware of the investigation, Hatch said. "Many businesses have problems with the Labor Department. It happens all the time. I don't get too excited about that."
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Additional Information
"A lot more serious accusations have been made against other judges." -Sen. Orrin Hatch