Posted by: Professionals In Human Resources Association (PIHRA) | July 6, 2011

The Ninth Circuit Has Revitalized the California Learned Professional Overtime Exemption

By Jonathan A. Siegel, Jackson Lewis LLP

There has been an important wage and hour development with respect to the California Learned Professional and the Administrative Exemptions from overtime. In 2009, employers 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). The 2009 decision was a problem for companies employing exempt unlicensed accountants and engineers in California.

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.

The Court first examined the Professional Exemption which includes the Learned Professional Exemption.  The elements of the California Professional Exemption are:

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:

(i) Work requiring knowledge of an advanced type in a field or science or learning customarily acquired by a prolonged course of specialized intellectual instruction and study, as distinguished from a general academic education and from an apprenticeship, and from training in the performance of routine mental, manual, or physical processes, or work that is an essential part of or necessarily incident to any of the above work; or

(ii) Work that is original and creative in character in a recognized field of artistic endeavor (as opposed to work which can be produced by a person endowed with general manual or intellectual ability and training), and the result of which depends primarily on the invention, imagination, or talent of the employee or work that is an essential part of or necessarily incident to any of the above work; and

(iii) Whose work is predominantly intellectual and varied in character (as opposed to routine mental, manual, mechanical, or physical work) and is of such character that the output produced or the result accomplished cannot be standardized in relation to a given period of time.

(c) Who customarily and regularly exercises discretion and independent judgment in the performance of duties set forth in paragraphs (a) and (b) . . .

The Court held that although licensed accountants are listed under subdivision (a) it does not preclude unlicensed accountants from being exempt under subdivision (b), the Learned Professionals Exemption. The decision states that unlicensed accountants, engineers and other positions can be evaluated under the Learned Professional Exemption. It does not state that these positions all of the sudden meet the Exemption. Rather, employers must still be able to establish that employees meet the duties and salary test of the Learned Professional Exemption.

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. Numerous individuals fail to meet the California Administrative Exemption because their work does not rise to the level of work that is of “substantial importance” or the individual does not perform such work more than 50% of the time each week. 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.

Jonathan A. Siegel is a partner in the Orange County office of Jackson Lewis LLP and editor of the Jackson Lewis California Workplace Law Blog (www.californiaworkplacelawblog.com).  Mr. Siegel can be reached at (949) 885-1360 or SiegelJ@jacksonlewis.com

Founded in 1958, Jackson Lewis, dedicated to representing management exclusively in workplace law, is one of the fastest growing workplace law firms in the U.S., with over 650 attorneys practicing in 46 cities nationwide.  For more information, please visit www.jacksonlewis.com.

 

 

 

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