Employing a Participant in the Provisional Licensee Program – Why and How?

In October of 2020, the California Supreme Court approved a Provisional Licensee Program that allows eligible 2020 law school graduates to practice as provisionally licensed lawyers under the supervision of fully licensed practitioners.  In early 2021, the Program was expanded to allow individuals who scored between 1390 and 1439 on a California bar exam administered between July 2015 and February 2020 to participate in the program in lieu of taking the exam again if they complete 300 hours of supervised legal practice under the Program and satisfy other requirements for admission.  Specific details about the Program and its requirements can be found at the State Bar’s website here.   

Provisionally licensed lawyers are allowed to engage in all of the same activities that a fully licensed lawyer is permitted to engage in, under the supervision of a qualifying supervising lawyer and subject to certain restrictions.  Under Rule 9.49, a provisionally licensed lawyer is allowed to provide a broad array of legal services for clients, including appearing before a court, drafting legal documents, contracts or transactional documents, and pleadings, engaging in negotiations and settlement discussions, and providing other legal advice, provided that the work is performed under the supervision of a qualifying supervising lawyer.

Why Should You Participate in the Provisional Licensing Program? 

• Helps you and your firm expand your scope with additional resources
• Allows you to pay it forward and help the next generation of lawyers
• Helps 2020 law grads enter the profession after a challenging year
• Helps to increase diversity in the profession and move toward a profession that better mirrors the population in California
• Helps emphasize the importance of civility, integrity and professionalism in your local legal community by shaping the civil communication style of your supervisee
• If you are active in your law school’s alumni efforts, this program is an excellent way to help the school’s alumni outreach efforts and support a fellow alum
• Demonstrates your leadership in the legal community
• Helps level the playing field.   Had some of these licensees taken the bar exam today, they would be admitted to practice now so they need your help and expertise.

Do I Have to Pay a Provisional Licensee?

Law firms may have to pay a Provisional Licensee. A Provisional Licensee would generally be considered a non-employee subject to all applicable wage and hour laws, unless an exception applies, or the Provisional Licensee is otherwise exempt. Because the liability associated with misclassification of employees can be significant, it is risky to treat the Provisional Licensee as an unpaid intern or trainee unless the Supervising Attorney is confident that the intern test under the federal Fair Labor Standards Act (“FLSA”) and/or the trainee test under California law, as applicable, are met. If the Provisional Licensee is physically located in California while engaged in the Program, both tests will need to be met.

While consulting employment counsel is always advised due to the breadth and intricacies of state and federal employment laws, below is a summary of the definition of an employee under California as well as the California and federal tests for unpaid trainees or interns.

California Presumes an Employment Relationship Exists

Under California law, anyone that performs a service for another is assumed to be an employee.  In order to rebut that assumption, the hiring individual or entity must prove that the worker is an independent contractor or otherwise exempt from wage and hour laws under the trainee/unpaid intern tests.

In order to establish an independent contractor relationship, the hirer must meet each of the three requirements of the ABC test:

1. The worker must be free from the control and direction of the hirer in connection with the performance of the work.
2. The worker must perform work outside the “usual course” of the hirer’s business.
3. The worker must be customarily engaged in an independent established trade, occupation, or business of the same nature as the work performed.

Because a Provisional Licensee must be supervised by the Supervising Attorney in the performance of legal services, the law firm would not be able to establish any of the elements of this test.

If an employment relationship exists, the employer must comply with all applicable wage and hour laws. California law presumes that all employees are non-exempt employees, meaning they are not exempt from Labor Code requirements such as overtime pay, meal and rest breaks, and minimum wage. In order to qualify as exempt, the employee must meet certain minimum salary thresholds, be paid on a salary basis and primarily perform exempt duties.

California – Trainee Test

California generally follows the federal test for unpaid interns, as discussed below. The DLSE has provided the following guidance most recently in Section 46.6.4 of its Policies and Interpretation Manual:

In California, there is no state statute or regulation which expressly exempts persons participating in an internship from wage and hour laws. The federal courts have noted, as well, that the federal FLSA itself provides little guidance in distinguishing between trainees/interns and employees. (Reich v. Parker Fire Protection District, 992 F.2d 1023, 1025 (10th Cir. 1993).)

As a result, the DLSE recognized that California relies on the six factors identified by the federal Department of Labor (DOL), derived from the Supreme Court’s Walling v. Portland Terminal Co., 330 U.S. 148 (1947), for the purpose of distinguishing an exempt intern/trainee from an employee, which are:

1. The training, even though it includes actual operation of the employer’s facilities, is similar to that which would be given in a vocational school;
2. The training is for the benefit of the trainees or students;
3. The trainee or students do not displace regular employees, but work under their close supervision;
4. The employer derives no immediate advantage from the activities of trainees or student, and on occasion the employer’s operations may be actually impeded;
5. The trainees or students are not necessarily entitled to a job at the conclusion of the training periods; and
6. The employer and trainee or students understand that the trainees or students are not entitled to wages for the time spent in training.

The DLSE also pointed to O.L. 2000.05.17, comparing culinary students to a published case that found X-ray students in a hospital to be employees. (Marshall v. Baptist Hospital, Inc. (D.C.M. d. 1979) 473 F.Supp. 465 (overruled on other grounds 668 F.2d 234). According to the DLSE, the Opinion Letter noted that “X-ray students were found to be employees of the hospital and entitled to be paid wages because the students performed administrative and clerical work in addition to their x-ray training, received little or no supervision, displace regular workers, and functioned as an integral part of the operation of the hospital. Thus, the students work went beyond a mere training experience which resulted in economic benefit to the hospital.”

Based on these factors and the interpretation provided by the DLSE, it will be difficult for a law firm or Supervising Attorney to establish that all of the elements of this test are met in order to treat a Provisional Licensee as an unpaid intern. This is the case because Provisional Licensees must complete a total of 300 hours of legal services under the supervision of a qualifying supervising lawyer. In order to meet this requirement, the Provisional Licensee must provide legal services to clients (which will necessarily benefit the law firm). Indeed, assignments that do not involve providing services to a client, such as training, are not considered “legal practice” under the Program’s rules.

Federal FLSA – Intern Test

This test has evolved over time and currently examines the “economic reality” of the intern-employer relationship to determine which party is the “primary beneficiary” of the relationship. Courts have identified the following seven factors as part of the test:

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

Courts have described the “primary beneficiary test” as a flexible test, and no single factor is determinative. Accordingly, whether an intern or student is an employee under the FLSA necessarily depends on the unique circumstances of each case. See https://www.dol.gov/agencies/whd/fact-sheets/71-flsa-internships for more information.

How Can an Employer Recoup the Costs of Supervising a Provisional Licensee Lawyer?  

Similar to 2L summer associate positions or post grad law clerks, law firms can bill out the time for any Provisional Licensee that it supervises.  Some firms may choose to bill this type of position at a paralegal hourly rate, some firms may bill at a law clerk rate, and some firms may bill at an amount slightly under the rate for first year associates.  The following examples show how you can recoup the firm’s costs to supervise a Provisional Licensee:

Assuming you pay your Provisional Licensee an amount commensurate with the level of service they are providing, your per hour costs could range from $50.00 per hour to $125.00 per hour or more.[1]

Sample 1:

Provisional Licensee paid per hour	Total paid to PL after 300 hours	Amount earned if billed at $75 per hour	Amount earned if billed at  $100 per hour	Amount earned if billed at $150 per hour
$50	$15,000[2]	$22,500	$30,000	$45,000

Sample 2:

Provisional Licensee paid per hour	Total paid to PL after 300 hours	Amount earned if billed at $100 per hour	Amount earned if billed at $150 per hour
$75	$22,500	$30,000	$45,000

Sample 3:

Provisional Licensee paid per hour	Total paid to PL after 300 hours	Amount earned if billed at  $100 per hour	Amount earned if billed at $150 per hour
$100	$30,000	$30,000	$45,000

Sample 4:

Provisional Licensee paid per hour	Total paid to PL after 300 hours	Amount earned if billed at  $150 per hour
$125	$37,500	$45,000

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[1] These rates are examples of potential senior paralegal – first year associate hourly rates, the amount earned for all examples is based on amounts paid, not billed, and these examples in no way are intended to suggest any kind of base, cap or typical rate.  

[2] These totals do not include payroll taxes and other expenses that may be incurred.