The Ninth Circuit Court of Appeals recently issued a ruling in a major wage-and-hour class action which could have a huge impact on overtime litigation. In Campbell v. PricewaterhouseCoopers, two-thousand (2000) unlicensed junior accountants brought a California wage-and-hour class action against their employer, PricewaterhouseCoopers LLP (PwC) alleging claims of overtime, meal and rest break violations, and other penalties and attorneys fees. Plaintiffs contended they were non-exempt employees and therefore were entitled to overtime. PwC asserted that plaintiffs were exempt from overtime under the professional and administrative exemptions within California's Industrial Welfare Commission's ("IWC") 2001 Wage Order.
Under California Labor Code, employees are generally entitled to overtime pay for work in excess of 8 hours per day or 40 hours per week. PwC argued that the class fell within the ambit of at least two of overtime exemptions (the professional and administrative exemptions). The District Court held that PwC could not exempt them from California's overtime requirement concluding that: (1) unlicensed accountants are categorically ineligible for the professional exemption because they are unlicensed, and (2) PwC had not established a triable fact issue on whether Plaintiffs would have fallen under either exemption.
On appeal, the Ninth Circuit reversed finding that the professional exemption's language did not categorically prohibit unlicensed accountants from falling under this exemption. The professional exemption reads as follows:
(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 ruling, the Ninth Circuit focused on the logistical issues that would ensue if the District Court's ruling were allowed to stand where thousands of "unlicensed employees" could sue for overtime violations who worked in professional disciplines. The Ninth Circuit concluded that just because licensed accountants were specifically enumerated in subpart (a) of the exemption, this did not mean that accountants had to be licensed to be exempt or that unlicensed accountants were categorically unable to satisfy subpart (b) exempting employees in "learned or artistic" professions.
Further, the Ninth Court held that in interpreting subpart (b), the "any employee" language requires an individual inquiry into whether each employee's job duties qualify as "learned" or "artistic" and therefore are exempt. Thus, though the statute lists accounting as a profession in subpart (a), an accountant can still be found to be exempt under subpart (b) since the application of subpart (b) depends on the employee's actual job duties, not the employee's job title or professional field.
To exempt an employee under the administrative exemption, an employer must establish five elements, including that the employee works "under only general supervision" while either: (1) performing work along specialized or technical lines requiring special training, experience, or knowledge, or (2) executing special assignments and tasks. The Ninth Circuit found that whether PwC's junior accountants met the administrative exemption was an "intensely factual" inquiry, and that it could not conclude, as a matter of law, that the plaintiffs did not work "under only general supervision" as required by the exemption.
Given the lack of regulatory guidance on the definition of "general supervision," and the numerous factual disputes in the record related to the administrative exemption coupled with the findings related to subpart (b) of the professional exemption, the Ninth Circuit remanded the case.
Going forward, employers have precedent to mount a vigorous defense against overtime claims, as well as potentially meal and rest breaks claims, and other wage and hour claims brought by employees who may qualify under subpart (b) of the professional exemption or those under the administrative exemption, including potentially paralegals, unlicensed engineers, and insurance adjusters.