Last summer Going Concern initiated its coverage on the wage and hour lawsuits against the Big 4 auditors and other firms that have been filed in California. The key case that is currently before the 9th Circuit Court of Appeals, Campbell v. PricewaterhouseCoopers, may decide how the rest of the cases proceed.
These suits were filed by non-licensed associates who believe they were misclassified under California law as exempt professionals and are due overtime and other benefits due to non-exempt employees. The primary issue before the 9th Circuit has to do with whether or not, under the professional exemption, an associate is required to be licensed by the state of California in order to qualify for exempt status (see the initial post linked above for further details).
The implications of the suit could change the face of public accounting. On one hand, accountants may find themselves in the position to earn more money in the short term. On the other, clients may shift focus away from Big 4 auditing services, or, when using Big 4 services, engage primarily manager-level and other exempt professionals to avoid overtime charges.
We checked in with the lead counsel for the plaintiffs, Bill Kershaw, for the latest, and we happened to catch him on the day (January 29th) that they were filing their opposition brief with the court. PwC filed its opening brief back in the fall, along with amicus (i.e. friend of court) briefs following in early November.
The plaintiffs' amicus briefs were filed on February 5th and while Mr. Kershaw would not share any names with us, he did inform us that there were some notable supporters that will be filing briefs. Parties claiming support via the web (though it is not clear whether they are expected to file as amicus) include among others, labor union UNITE HERE.
The briefs are under seal at the request of the defendants who are claiming proprietary privilege.
In the past, the 9th Circuit has been accused of having a liberal bias which could be perceived as an advantage to the plaintiffs. While Mr. Kershaw agreed that the 9th Circuit was more "worker friendly" in the past, he told us, "After eight years under the Bush administration, the court has considerably more conservative justices."
According to the 9th Circuit's website, former President George W. Bush appointed seven justices while in office. Of the 47 justices currently serving, 21 were appointed by Republican Presidents and 26 by Democratic Presidents.
Despite the political makeup, Mr. Kershaw believes, as he did when we last spoke with him on the matter, that the evolution of the law of the exemptions (i.e. who, among other things, is and is not eligible for overtime) will demonstrate that the plaintiffs were not "learned professionals," and will prevail in case.
We reached out to all the accounting firms listed as defendants, receiving responses from only BDO, who provide the following statement: "We believe that the employee in this case was properly classified as exempt. This case has been stayed pending resolution of the PwC appeal. As is our policy on matters of litigation, BDO does not intend to comment further until this case is resolved." We were also informed that in the BDO case that the class certification was denied by the trial court and the appeal was also denied.
In the case of Hood & Strong, LLP, we were referred to their attorney, Jonathan R. Bass of Coblentz, Patch, Duffy & Bass, who we spoke with briefly about his case, Kathleen McFarland v. Hood & Strong LLP.
Mr. Bass indicated to us that the lawsuit against his client is only one of four that is being tried in state court and would not necessarily be affected by the ruling in Campbell. He further indicated that these lawsuits are something that his client, and most likely all the defendants, did not anticipate, "it is not likely that any of these firms considered the possibility of their employees being treated as anything other than exempt."
No other firms listed as defendants responded to our request to comment.
Ultimately a decision in Campbell may not be known until 2011, at which point the litigation could actually proceed or be settled.