Ninth Circuit Hints That Unlicensed Accountants May Be Exempt As Learned Professionals
On February 15, 2011, the Ninth Circuit held oral argument in Campbell v. PricewaterhouseCoopers, LLP, a significant class action that concerns the exempt status of unlicensed accounting professionals under California law. The case has potentially far-reaching consequences, as the Ninth Circuit’s decision may implicate the exempt status of unlicensed individuals in other professional fields, such as law, medicine, architecture, engineering, optometry and dentistry.
During oral argument, the three-judge panel expressed reluctance to affirm the district court’s decision holding that, as a matter of law, unlicensed accountants did not qualify for the California learned professions exemption. The argument focused primarily on the portion of the district court’s order that ruled unlicensed accountants cannot be exempt under California’s learned professional exemption because “accounting” is one of the enumerated professions of the professional exemption. The district court’s ruling potentially undermines the exempt status of unlicensed professionals in many other fields such as law and medicine. The panel referred to the plaintiffs’ argument on the issue of the learned professional exemption as “convoluted,” indicating that it required a departure from the plain meaning of the applicable wage order.
The court’s decision on this issue is highly anticipated, as several similar cases are pending against other accounting firms, and many of those cases also involve claims under the Fair Labor Standards Act.
The class at issue in Campbell encompasses associates within PricewaterhouseCoopers’
(“PwC”) Attest division in California who do not hold CPA licenses. PwC managers and partners are required to hold CPA licenses, but associates are generally unlicensed due to the experience and examination requirements for CPA licensure.
The class members perform audits of financial statements, designed to assure that they are prepared in accordance with Generally Accepted Accounting Principles and are free of material misstatements. While the parties in Campbell disagree sharply as to the nature of the class members’ work, their primary job responsibility is to verify the accuracy of financial statement items by obtaining and reviewing their underlying documentation. Associates are supervised by managers and partners, but the level of supervision is hotly contested by the parties.
At issue before the Ninth Circuit is the district court’s order granting plaintiffs’ motion for summary judgment, which held that (1) unlicensed accountants cannot meet the requirements for California’s learned professional exemption as a matter of law; and (2) because accounting regulations and PwC’s internal policies require that unlicensed associates be supervised, they cannot be exempt under the California administrative exemption. The Ninth Circuit took the case under submission and will issue a formal written opinion.
The Learned Professional Exemption
The district court held that because licensed accountants are exempt as one of the enumerated professions of Wage Order No. 4’s professional exemption, unlicensed accountants cannot be exempt under the learned professional exemption. The district court reasoned that unlicensed accountants must be excluded from the learned professional exemption to avoid rendering the enumerated professions provision surplusage. The court reasoned that there cannot be two tracks to the professional exemption; the enumerated professions provision is redundant unless application of that provision exempts an employee who would otherwise be non-exempt.
At oral argument, the plaintiffs raised additional statutory interpretation arguments, and attempted to distinguish unlicensed accountants from unlicensed professionals who hold advanced degrees, such as medical residents.
The judges characterized plaintiffs’ arguments as requiring the court to take several uncertain steps to reach the conclusion that unlicensed accountants could not be exempt under the learned professional exemption, and to “go out on a limb.” The panel also seemed wary of plaintiffs’ emphasis on advanced degrees as a distinguishing factor between unlicensed accountants and other unlicensed professionals, noting that education will vary based upon each class member, and that other unlicensed professionals such as engineers may not have advanced degrees. The panel implied that the district court’s reasoning would lead to absurd results, precluding employees such as unlicensed veterinarians, first year associates at law firms and unlicensed medical residents from qualifying for the learned professional exemption.
The panel inquired into whether class members who lead audit engagements could be performing administrative duties as opposed to auditing duties. However, the panel did not make any inquiries regarding the level of supervision of class members, which the parties fiercely disputed. PwC argued, unchallenged, that the level of supervision is a question of fact for the jury, and cannot be determined as a matter of law, as the district court did.
The panel indicated that the district court’s granting of summary judgment may have been premature. It noted that the record contained disputed facts, and that PwC merely sought the opportunity to prove that its unlicensed associates met the professional and/or administrative exemption.
While the panel’s questioning at oral argument is not necessarily predictive of its eventual decision, the panel did convey skepticism of the district court’s ruling. In particular, the panel seemed unwilling to adopt the district court’s reasoning with regard to the learned professional exemption. The panel did not seem to be persuaded by the district court’s statutory interpretation analysis, and expressed concerns over the broad reach of the district court’s decision into other professional fields. The panel gave fewer signals regarding its impressions of other issues in the case, particularly the district court’s ruling with regard to the administrative exemption.