The Ninth Circuit Has Revitalized The California Learned Professional Overtime Exemption and Remanded To A Jury Key Issues Under The Administrative Exemption
In 2009, companies who classified certain unlicensed accountants, engineers and other professions as exempt from overtime under the California Learned Professional Exemption were dealt a broadside by a federal District Court when it held that unlicensed accountants were categorically ineligible for the Learned Professional Exemption. The decision lead to numerous employers revaluating the Learned Professional Exemption involving certain positions and it likely triggered significant exempt status litigation in California. See Campbell v. PricewaterhouseCoopers, LLP, 602 F. Supp. 2d 1163, 1185 (E.D. Cal. 2009).
On June 15, 2011, the Ninth Circuit reversed, in part, and remanded the lower court’s controversial decision and breathed new life into the California Learned Professional Exemption. See Campbell v. PricewaterhouseCoopers LLP, 9th Cir., No. 09-16370, 6/15/11.
The case involves approximately two-thousand unlicensed junior accountants at PricewaterhouseCoopers LLP. The court found that unlicensed accountants were not categorically barred from being classified as exempt from overtime based on the Learned Professional Exemption. The Court held that the employer could present evidence to establish the exemption to a jury.
Although not likely to receive as much attention, the Ninth Circuit also remanded to the jury certain important questions regarding the Administrative Exemption. For example, the jury must review whether the audit work performed by the junior accountants could be classified as work of “substantial importance” to the management of the clients’ operations. The issue of whether work is of a “substantial importance” under the Administrative Exemption is a critical element under the exemption which many employers struggle with interpreting. As a result, employers may also receive additional help in clarifying a problematic area under the Administrative Exemption. The Court noted:
While we recognize Plaintiffs are on the low end of PwC’s hierarchy, we see no authority that would bar their audit work from meeting this test as a matter of law. The former federal regulations incorporated by the administrative exemption include several examples of administratively exempt white collar employees, including tax consultants, wage-rate analysts, analytical statisticians, claim agents, and “many others.” Id. § 541.205(c)(3), (5). In contrast, the examples of nonexempt employees are predominately clerical—bookkeepers, secretaries, messengers, and other “clerks of various kinds.” Id. § 541.205(c)(1)-(2). Whether Plaintiffs are more comparable to the former category or the latter will depend on how the jury resolves the numerous factual disputes discussed above . . .
This case represents a well timed victory for employers with the end of the story still to be written by the jury which has the job to deliberate the factual issues in the case. However, employers should consult with their legal counsel regarding the implications, if any, of this decision for their organizations.
How is it that an employee practicing law without a professional license can be fined, and employees compiling deposition summaries and doing legal research are deemed as non-exempt, yet employees lacking a CPA, but who are signing off on engagement letters and preparing Form 10-Ks submitted to the SEC, in light of Sarbanes Oxley would be considered to be engaged in the profession of accounting without a license, yet the employee who is following a checklist and merely typing in data and looking for errors is considered a professional? Should these non-licensed employees be able to open their own practice if they are considered professionals, or should they be subject to the requirements and standards that licensed professionals are held to?
It seems that on one hand, the employer can benefit by working these employees long hours, which in some cases puts them under minimum wage, as well as saves the employer the costs from having to pay for continuing education (they don't need it because they do not have a license), yet these employees are unable to open their own practice despite being deemed as "learned professionals."
There is really no incentive to go to school for accounting anymore if you are looking at being paid $35k per year, but required to work 60-100 hours per week, which means you are making less than you would if you were paid hourly even at minimum wage. This decisions did the practice (and the legal practice), students, an injustice.
The 9th circuit basically said firms can pay these employees as salaried exempt, and work them more to meet your billing and labor demands, so the firms do not have to hire additional people, nor take on overtime costs, and moreover these employees can't open up their own practice, but they can do clerical work so long as they are not practicing accounting.
Employees in law firms should be able to practice law without a license as well if they are being deemed as professionals.