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.