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Ninth Circuit says low-level accountants might be exempt from overtime

June 15, 2011

In a much anticipated ruling, the Ninth Circuit held that unlicensed junior accountants might be exempt from overtime rules under California law.

In Campbell v. PricewaterhouseCoopers, a class of lower-level audit associates of PwC sued for overtime payments, meal and rest break violations, and the usual compendium of penalties and attorneys fees.  Plaintiffs contended they were non-exempt employees and therefore were entitled to overtime.  PwC asserted that plaintiffs were exempt professionals under either the professional exemption or the administrative exemption.  The trial court held that, as a matter of law (i.e., there was no factual issue requiring a trial) the junior accountants were not exempt, rejecting, and pretty vehemently so at that, PwC’s arguments.

The Ninth Circuit disagreed, and reversed the trial court’s decision.  The Ninth Circuit opinion states at some length why the trial court should not have decided the exemption question as a matter of law — mostly because, under California law, the inquiry into a person’s exempt status is a pretty factually intense exercise.  As the court stated:

[W]e believe the record establishes several material fact questions on this issue. As already explained, the crucial touchstone for the professional exemption. . . is the employee’s actual job duties and responsibilities. . . .  The record here contains myriad conflicting evidence about Plaintiffs’ duties and responsibilities as unlicensed Attest associates.  The parties dispute everything from what Attest associates actually do during audit engagements to whether PwC can reasonably expect unlicensed junior accountants to perform anything more than menial, routinized work.  The wide array of evidence from both parties includes depositions from class members and other PwC employees, internal PwC manuals explaining job roles and procedures for audit engagements, and detailed training documents for PwC’s auditing software.  Only a factfinder can weigh this voluminous conflicting evidence and determine whether Plaintiffs meet the standards of the professional exemption.

The court reached a similar conclusion with regard to the administrative exemption:

Both parties introduced a wealth of evidence about the nature and scope of PwC’s supervision [the administrative exemption requires a person work only “under general supervision”] over Plaintiffs.  A jury should evaluate credibility and weigh this extensive conflicting evidence. . . .  Without better guidance on the legal definition of “general supervision,” [none of which appeared to exist under California law,] this highly contested fact issue can be resolved only after trial. . . .

The Ninth Circuit also held that there were factual questions about whether the plaintiffs work “directly related to management policies or general business operations of PwC or its clients, and whether plaintiffs were “primarily engaged” in exempt-level work, two additional requirements of the administrative exemption.

The Campbell case is going back to the trial court.  PwC is looking at an expensive trial.  But it may be more difficult for plaintiffs to proceed as a class action, because of the individualized nature of the inquiry the Ninth Circuit directed the trial court to conduct as to each plaintiff.  It’s also a good bet that this case will be applied in contexts other than the accounting field — perhaps to paralegals, unlicensed engineers, insurance adjusters, etc. — and that it will perhaps be more difficult to get such cases dismissed (by employers) or certified as class actions (by plaintiffs) in the future.  The case may also nudge the California courts into examining the “general supervision” standard in the professional exemption, as the Ninth Circuit essentially requested in the opinion.

Employers should be wary of “pushing the envelope” when it comes to exemptions.  the wage orders list several licensed professionals that qualify — if your employees aren’t licensed, or aren’t in one of the listed professions, get an opinion from the Labor Board before withholding overtime pay.  Even if you are right, whatever you save will likely be significantly outweighed by the cost and inconvenience of defending a wage and hour suit.

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From → Wage and hour

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