In Campbell v. PricewaterhouseCoopers, LLP, two thousand unlicensed junior accountants brought a wage and hour class action against their employer, PricewaterhouseCoopers, LLP, alleging that it had failed to pay them mandatory overtime. The Ninth Circuit Court of Appeals held that these unlicensed accountants were not categorically ineligible for the exemptions to mandatory overtime. As this case indicates, an employee’s licensure status is not determinative of the employee’s exemption status.
California’s Mandatory Overtime and its Three Exemptions
According to Section 510 of the California Labor Code, employers must pay overtime to any employee who works more than eight hours a day or forty hours a week. However, Wage Order No. 4–2001 establishes three exemptions to California’s mandatory overtime: the executive exemption, the administrative exemption and the professional exemption.
The executive exception covers employees whose primary duty is the management of the enterprise in which they are employed or a customarily recognized department of that enterprise. Employees who fall under this exemption must customarily and regularly direct the work of two or more employees. Furthermore, these employees must have the authority to hire or fire other employees or their recommendations as to hiring and firing must be given particular weight.
The administrative exemption covers employees who perform work directly related to management policies or general business operations of either the employer or the employer’s clients. Employees who fall under this exemption must customarily and regularly exercise discretion and independent judgment and must work under only general supervision. Furthermore, they must either perform specialized or technical work requiring special training, experience or knowledge, or they must execute special assignments and tasks. Finally, they must be primarily engaged in exempt work meeting the above requirements.
The professional exemption covers two types of employees: (1) those who are licensed or certified by the State of California and are primarily engaged in the practice of one of the following recognized professions: law, medicine, dentistry, optometry, architecture, engineering, teaching or accounting, and (2) those who are primarily engaged in an occupation commonly recognized as a learned or artistic profession. The latter category includes occupations requiring advanced knowledge in a field acquired through a course of study, work that is original and creative in a recognized field of art, and work which is predominantly intellectual and varied in character. Both categories of employees must customarily and regularly exercise discretion and independent judgment in the performance of their duties.
For each of the categories of exemptions, there is a minimum salary requirement of two times the State’s minimum wage for full-time employment.
The Ninth Circuit’s Analysis in Campbell v. PricewaterhouseCoopers, LLP
In Campbell, plaintiffs argued that they were categorically ineligible for the professional exemption because they were not licensed CPAs. The Ninth Circuit disagreed, holding that the tests listed in Wage Order 4-2001 are alternative, not exclusive, tests for qualifying under the professional exemption. Therefore, the fact that an employee lacks a CPA license does not categorically preclude that employee from qualifying for the professional exemption if that employee is engaged in work that requires advanced knowledge in a field acquired through a course of study, that is original and creative in a recognized field of art or, as in this case, that is predominantly intellectual and varied in character. The court further held that the plaintiffs could fall within the administrative exemption if their work was performed under only general supervision, they performed work directly related to management policies or general business operations and they were primarily engaged in exempt work.
Ultimately, the court held that plaintiffs were not automatically ineligible for the professional and administrative exemptions to mandatory overtime simply because they were unlicensed. Therefore, the court returned the case to the district court to determine whether, based on the facts presented, plaintiffs engaged in work that required advanced intellectual or artistic knowledge in a field acquired through a course of study, thereby falling under the professional exemption, or were engaged primarily in business operations or management while working under only general supervision, thereby qualifying for the administrative exemption.
What This Means For You
While this case specifically addressed the profession of accounting within the context of the professional and administrative exemptions, the Court’s holding has a much broader application. When analyzing whether an employee is exempt, the employee’s licensure status does not end the inquiry. For example, employees in the fields of law, medicine, dentistry, optometry, architecture, engineering and teaching can fall within the professional exemption prior to acquiring their state licenses or certifications if those employees engage in work that requires advanced intellectual or artistic knowledge in a field acquired through a course of study. Furthermore, unlicensed employees can qualify for the administrative exemption if they engage primarily in business operations or management while working under only general supervision. Finally, unlicensed employees can qualify for the executive exemption if their primary duty is management, they regularly direct the work of at least two employees, and they have the authority to hire, fire, or recommend the hiring or firing of other employees.
Wilke Fleury attorney Natalie Johnston has been elected to the UC Davis School of Law Alumni Association Board for a three-year term. Through the Board, King Hall alumni support and promote their alma mater by working with current students and staff. Natalie is excited to take on this new challenge, and looks forward to the opportunity to give back to the UC Davis Law community.
Wilke Fleury partner Megan Lewis will be serving as the President of Women Lawyers of Sacramento ("WLS") for 2012. Ms. Lewis has been a member of WLS since 2002 and has served on the executive committee since 2009. As WLS’s Vice President in 2011, Ms. Lewis spearheaded the Unity Bar Dinner, which celebrated various diversity organizations within the Sacramento County Bar Association. Megan has an exciting and challenging year ahead of her as President, as 2012 marks WLS’s 50th anniversary.
Wilke Fleury is proud of Megan’s continuing leadership in the Sacramento legal community.
Wilke Fleury Names Ron Lamb as Managing Partner Wilke Fleury is pleased to announce that Ron Lamb has been named as the firm’s managing partner. A longstanding and well-respected fixture in the Sacramento area medical malpractice defense community, Ron joined Wilke Fleury in April of 2005, and immediately showed himself to be a highly competent lawyer and administrator. Under Ron’s leadership, Wilke Fleury will continue to deliver the efficient, high-quality legal services its clients have come to expect.
Prior to coming on board with Wilke Fleury, Ron was the managing shareholder of the Sacramento law firm of Rust, Armenis, Schwartz, Lamb & Bills. Ron is also a retired Lieutenant Colonel in the United States Air Force, where he served as a Weapons Systems Officer and, later, an Air Intelligence Officer.
The following is a synopsis of notable changes in California and federal employment laws that take effect in 2012.
California Law AB 469 – Wage Theft Prevention Act
At the time of hiring, every employer must provide each employee with a notice containing the rate and basis of the employee’s wages. Employers must also notify each employee in writing within seven calendar days of any changes to the information contained in the notice unless the changes are reflected in the employee’s next wage statement. The Division of Labor Standards Enforcement has promulgated a form to be used for this purpose, which can be downloaded from the DLSE’s website: www.dir.ca.gov/dlse/LC_2810.5_Notice.pdf. All of the information contained within the form must be provided even if the form itself is not used.
In addition to paying civil penalties, employers who fail to pay employees the minimum wage will now be required to pay restitution to employees for unpaid minimum wages. Furthermore, employees may recover attorney’s fees and costs to enforce a judgment for unpaid wages. Employers who willfully fail to timely pay a judgment for wages will now be guilty of a misdemeanor and subject to fines, imprisonment or both for each offense.
This law also extends the time the Labor Commissioner has to commence action to collect a statutory penalty or fee from one year to three years.
SB 459 – Penalties for Willful Misclassification of Independent Contractors
Employers that willfully misclassify an employee as an independent contractor will be assessed a penalty of between $5,000 and $25,000 per violation. The law also prohibits employers who have willfully misclassified an employee as an independent contractor from charging the employee any fees or making any deductions from his compensation if such a fee or deduction would have been prohibited if the employee were not an independent contractor.
AB 22 – Use of Credit Report Information in Employment
This law prohibits employers, with the exception of certain financial institutions, from obtaining a credit report for employment purposes unless the applicant is seeking one of the following positions:
• positions in the state Department of Justice;
• managerial positions, as defined under the “executive” exemption to California overtime laws;
• peace officer or other law enforcement positions;
• positions for which the information contained in the report is required by law to be disclosed or obtained by the employer;
• positions involving regular access to specified personal information for any purpose other than routine solicitation and processing of credit card applications in a retail establishment;
• positions in which the person is or would be a named signatory on the employer’s bank or credit card account, or authorized to transfer money or enter into financial contracts on the employer’s behalf;
• positions involving access to confidential or proprietary information; or
• positions involving regular access to cash amounts of $10,000 or more.
If a credit report is obtained for one of these positions, the employer must provide written notice to the applicant or employee specifying the basis for requesting the report and providing the employee the opportunity to request a copy of the report.
AB 887 – Gender Non-Discrimination
Refines the definition of “gender” under the Fair Employment and Housing Act (“FEHA”) to include a person’s gender identity or gender expression. “Gender expression” is defined as “a person’s gender-related appearance and behavior whether or not stereotypically associated with the person’s assigned sex at birth.”
SB 299 – Extended Health Coverage During Pregnancy Leave
Employers must continue to maintain and pay for coverage under a group health insurance plan for employees on pregnancy disability leave for up to four months.
AB 592 – Pregnancy Leave/CFRA Leave
This law makes it an unlawful employment practice for employers to interfere with, restrain, or deny the exercise of, or the attempt to exercise, any right provided under the California Family Rights Act or the Pregnancy Disability Leave Law.
AB 1236 – Electronic Employment Verification
Prohibits the state, or a city, county, or special district, from requiring private employers to use an electronic employment verification system except when required by federal law or as a condition of receiving federal funds.
SB 559 – Discrimination: Genetic Information
This law expands FEHA to prohibit discrimination based on an applicant’s “genetic information.” Genetic information is defined as:
• an individual’s genetic tests;
• the genetic tests of the individual’s family members; or
• the manifestation of a disease or disorder in the individual’s family members.
SB 757 – Health Insurance Coverage for Domestic Partners
Existing law requires that domestic partners be provided with the same insurance coverage as spouses under all circumstances. However, policies issued outside the state of California to employers with a principal place of business and a majority of employees outside of California are exempt from this requirement. SB 757 eliminates that exemption by providing that no health insurance policy or certificate of health insurance marketed, issued or delivered to California residents may discriminate between spouses or domestic partners of the same sex and spouses or domestic partners of a different sex.
Increase in Minimum Salary Requirements for Exempt Computer Professionals and Physicians
California is raising the minimum salary required to qualify for the “computer professional” overtime exemption. Computer professionals must be paid a minimum of $38.89 per hour or $81,026.25 annually and not less than $6,752.19 per month. Similarly, the minimum rate for exempt physicians will increase to $70.86 per hour.
New Mandatory Federal Law Employment Poster
All employers subject to the National Labor Relations Act (NLRA) are required to post notices informing employees of their rights under the NLRA. The 11-by-17 inch notice will be provided at no charge by NLRB regional offices or may be downloaded from the NLRB website and printed either in color or in black and white. Employers must also post the notice on an internet site if personnel rules and policies are customarily posted there.
Wilke Fleury associate Sarah Scott recently joined the Advisory Committee for the Voluntary Legal Services Program of Northern California (VLSP). VLSP is a volunteer-based legal aid program that provides free assistance with civil legal matters to low income clients living in the Sacramento region. The organization is celebrating its 30th anniversary this year.
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