Campbell v. PwC: Ninth Circuit Says Unlicensed Accountants May Be Exempt under California Law

Two-thousand unlicensed junior accountants brought this wage-and-hour class action against their employer, PricewaterhouseCoopers LLP (PwC). Among other things, the accountants claim PwC failed to pay them mandatory overtime under California law. The district court granted partial summary judgment to the accountants, finding as a matter of law that PwC could not exempt them from California’s overtime requirements. PwC filed this interlocutory appeal.

We must decide whether unlicensed accountants in California are categorically ineligible, as a matter of law, to fall under two state regulatory exemptions from mandatory overtime: the professional exemption and the administrative exemption. We hold they are not. Because the district court [E.D. Cal., Judge Karlton] erroneously rejected triable defenses under both exemptions at summary judgment, we reverse.

Campbell v. PricewaterhouseCoopers LLP, --- F.3d ----, 2011 WL 2342740 (9th Cir. 6/15/11). Slip op. at 1.

The parties' exemption arguments followed familiar lines: 

Plaintiffs claim their work is predominately routinized and menial. They argue that strict instructions, comprehensive computer auditing software, and an extensive work-review system all preclude them from exercising any significant degree of discretionary judgment or analytical thinking. Named-plaintiff Sobek described her work as “comparing one number to another number to see if they agree. . . . a very tedious activity.” Plaintiffs also characterize their responsibilities as “sitting at[a] computer, going through highly routinized and nondiscretionary Steps.”

PwC, on the other hand, argues Plaintiffs perform analytical work “integral” to PwC's Attest services. To the extent Plaintiffs do not regularly exercise discretion and independent judgment during an audit engagement, PwC says they are failing to meet the firm's expectations. PwC emphasizes the variety of duties performed by Plaintiffs during an engagement and claims the failure to perform those tasks adequately can have “significant consequences” for PwC's clients. During one engagement, for example, named-plaintiff Campbell overlooked approximately $500,000 in the client's unrecorded liabilities. This oversight, which Campbell himself described as a “serious error,” was ultimately discovered by another team member. The error required a late financial adjustment and made the client unhappy.

Slip op. at 2.

First, the Ninth Circuit held that unlicensed accountants may be exempt as professionals, focusing on the alternative language of the Wage Order:

(3) Professional Exemption[:] A person employed in a professional capacity means any employee who meets all of the following requirements:

(a) Who is licensed or certified by the State of California and is primarily engaged in the practice of one of the following recognized professions: law, medicine, dentistry, optometry, architecture, engineering, teaching, or accounting; or

(b) Who is primarily engaged in an occupation commonly recognized as a learned or artistic profession.

In other words, even though the Wage Order lists accounting as a profession in section (a), an accountant can be exempt under section (b). Slip op. at 4. The Court rejected the plaintiffs' contention that the language of section (a) requires accountants to be licensed in order to be exempt. Ibid. "Although we express no opinion on how easily or frequently unlicensed accountants might satisfy subsection (b), we do not agree that an unlicensed accountant could never possibly do so." Ibid.

The Court then held that PwC had raised triable issues of fact as to whether or not the plaintiffs were in fact exempt.

As already explained, the crucial touchstone for the professional exemption—especially subsection (b)—is the employee's actual job duties and responsibilities. § 541.308(a) (incorporated by § 11040(1)(A)(3)(e)); see also DLSE Enforcement Policies & Interpretations Manual § 52.3.1 (2002) (“As with any of the exemptions, job titles ... alone may not reflect actual job duties, and therefore[ ] are of no assistance in determining exempt or non-exempt status.”) [hereinafter 2002 DLSE Manual]. 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. See People v. Maury, 30 Cal.4th 342, 133 Cal.Rptr.2d 561, 68 P.3d 1, 46 (Cal.2003) (“[I]t is the exclusive province of the [factfinder] to determine the credibility of a witness and the truth or falsity of the facts upon which a determination depends.”).

Slip op. at 8.

Next the Court held that PwC had "proffered enough evidence to survive summary judgment and take the administrative-exemption defense to trial." The district court "found there was no material fact question on whether Plaintiffs' work during audit engagements was performed 'under only general supervision.'" The Ninth Circuit disagreed:

[The district court cited] a California statute and a professional accounting standard, both require that unlicensed accountants be subject to control, supervision, and review by licensed CPAs. Campbell, 602 F.Supp.2d at 1183–84 (citing Cal. Bus. & Prof.Code § 5053; American Institute of Certified Public Accountants (AICPA) Professional Standards § 311.12). Although these two provisions tell us Plaintiffs must be supervised, they say nothing about whether that supervision must exceed mere “general” supervision. Neither provision distinguishes general supervision from any other kind of supervision. Both provisions require supervision of some kind, but not of any particular degree or scope. See Amicus Br. of AICPA 8 (“It simply is impossible to derive a single rule of supervision from the Auditing Standards....”). For that reason, we cannot conclude as a matter of law that all unlicensed accountants are necessarily subject to more than general supervision.

Slip op. at 10. The Court thus held that PwC's exemption defenses "must be resolved at trial." Slip op. at 11.

The opinion is available here.