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.