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Federal Register / Vol. 86, No. 95 / Wednesday, May 19, 2021 / Rules and Regulations
This final rule is effective on January 1, 2022.
FOR FURTHER INFORMATION CONTACT:
Stefanie K. Davis, Senior Assistant General Counsel, Legal Services Corporation, 3333 K Street NW, Washington, DC 20007; 202 2951563
phone, 202 3376519 fax, or sdavis@lsc.gov.
SUPPLEMENTARY INFORMATION:
DATES:

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I. Background In 1995, LSC initiated rulemaking to require recipient employees to keep records of time spent working on LSCfunded activities. 60 FR 48956, Sep. 21, 1995. LSC took this step to improve accountability of recipients for their Corporation funds, and in response to concerns expressed during Congressional hearings. Id. LSC
wanted to assure that recipients maintained adequate documentation to support allocation of costs to the LSC
grant. Id. at 48957. Consequently, LSC
intended the rule to require all recipients to account for the time spent on all cases, matters and other activities by their attorneys and paralegals, whether funded by LSC or other sources. Id. LSC did not define either attorney or paralegal, although LSC
did define the terms cases and matters. Id. LSC did not prescribe either the format or the content of the required timekeeping reports. Id.
After receiving public comment, LSC
adopted the proposed rule as final, with limited changes. 61 FR 14261, Apr. 1, 1996. In the preamble to the final rule, LSC stated that the rule applied to recipient attorneys and paralegals regardless of whether their salaries were paid using LSC funds. Id. Applying the rule to all attorneys and paralegals, LSC
explained, reflected language that Congress included in a version of the fiscal year 1996 appropriations act that it passed, but the President vetoed. Id.
LSC retained the requirement because it anticipated that Congress and the President would agree on legislation containing a similar requirement for fiscal year 1996, which they did. Sec.
504a10, Pubic Law 104134, 110
Stat. 1321, 132154 1996 stating that LSC could not award appropriated funds to any person or entity unless such person or entity agrees to maintain records of time spent on each case or matter with respect to which the person or entity is engaged.. This requirement has been incorporated by reference annually thereafter.
In the preamble to the final rule, LSC
explained how it expected recipients to implement the requirement to maintain contemporaneous time records. LSC

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stated that contemporaneous meant in most cases, by the end of the day.
61 FR at 14262.
LSC initiated its first revision of part 1635 in 1998. That year, the Office of Inspector General OIG conducted an audit of recipients compliance with specific regulations, including part 1635, and issued a report that formed the basis for Managements recommended changes. In the report, OIG stated its finding that, based on records maintained in compliance with part 1635, it could not tell whether parttime employees of an LSC funding recipient engaged in restricted work during LSC-funded time. 63 FR 56594, Oct. 22, 1998.
In response to OIGs findings, LSC
proposed two changes. The first was to require recipients to ensure that the time records for both fulland part-time employees were consistent with their payroll time and attendance records. In other words, the time spent by an employee must at least add up to the amount reflected in the attendance records. Id. at 56595. LSC also proposed to require full-time and parttime attorneys and paralegals to record, for each case, matter, or supporting activity that they handled, the date and exact time of day they worked on that activity. Id. Alternatively, LSC proposed that part-time attorneys and paralegals could certify that they did not engage in restricted activities during the time they were working for the recipient. Id.
LSC did not finalize its revisions to part 1635 until 2000. At that time, LSC
adopted the rule with two changes relevant here. 65 FR 41879, Jul. 7, 2000.
First, LSC removed the proposed text requiring attorney and paralegal time records to be consistent with their payroll time and attendance records. Id.
at 41880. Several commenters on the proposed rule expressed concern that a rule requiring employee time records to match the payroll records would put recipients at risk of violating the Fair Labor Standards Act. Id. Although LSC
did not agree with the commenter raising the concern, LSC removed the language because it believed the language was not necessary. Id. Second, LSC adopted the certification requirement for part-time attorneys and paralegals. Id. Put differently, part-time attorneys and paralegals do not have to report the date and exact time of day that they worked on cases, matter, or supporting activities, but must certify that they did not work on restricted activities during the hours they worked for a recipient.
Management believes regulatory action is justified at this time for three reasons. First, the lack of a definition for
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the term paralegal creates a lack of uniformity across recipients regarding which employees must keep time. In other words, some recipients employ staff who are called paralegals, but who do only administrative work, while others employ staff who perform substantive legal work under an attorneys supervision or who have satisfied their states requirements for holding oneself out as a paralegal, but who may not have the title of paralegal.
Because the regulation does not define the term paralegal, it is unclear whether some or all recipient employees described in the preceding sentence must keep time consistent with part 1635. Consequently, LSC cannot be certain that part 1635 covers all recipient employees who are doing significant amounts of work on the LSC
grant, which appears to be what LSC
intended when it originally drafted the rule to cover attorneys and paralegals.
LSC proposes to remedy this problem by revising the language to include all employee staff, regardless of qualification or title, who are doing work that can be identified with specific awards. Conversely, employee staff whose work is solely allocated across awards as indirect costs need not record their time under part 1635.
Second, the federal government rules governing recipient timekeeping have changed significantly, as have best practices for nonprofit timekeeping. LSC
believes it is reasonable to reconsider the requirements of part 1635 in light of these advances and determine whether to revise the rule to reflect the new standards. Finally, LSC proposes to remove any provisions of the rule that are obsolete.
LSC added rulemaking on part 1635
to its annual rulemaking agenda in April 2016. On January 30, 2020, the Operations and Regulations Committee Committee of the Board voted to recommend that the Board authorize rulemaking on part 1635. The Board voted to authorize rulemaking on January 31, 2020. On October 19, 2020, the Committee voted to recommend that the Board approve publication of an NPRM in the Federal Register with a 60-day public comment period. On October 20, 2020, the Board accepted the Committees recommendation and voted to approve publication of the NPRM. LSC published the rule in the Federal Register on November 5, 2020.
The comment period remained open for ninety-two days and closed on February 5, 2021.
On April 19, 2021, the Committee voted to recommend that the Board adopt this final rule and approve its publication in the Federal Register. On
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