Are Entry-Level Accountants Exempt Under the FLSA?

The Second Circuit Court of Appeals recently held that entry-level accountants were exempt learned professionals under the Fair Labor Standards Act (FLSA).

In Pippins v. KPMG, LLP, the plaintiffs were entry-level “audit associates” who alleged that they should have been paid overtime under the FLSA. Case No. 13-889-cv (2d Cir., July 22, 2014). The plaintiffs were: (i) the most junior members of the accounting firm’s client engagement teams; (ii) performed the lowest-level audit tasks; (iii) received instruction and supervision from more senior members of the teams; and (iv) their contributions to audit reports were reviewed and processed by more senior members of the audit team before being assimilated into final audit reports. The plaintiffs argued that the work they performed was similar to work performed by accounting clerks or bookkeepers who are generally not exempt learned professionals under the FLSA. See 29 C.F.R. § 541.301(e)(5).

The court held that although the work performed by the plaintiffs was relatively low-level for the accountants at the firm, it was “predominantly intellectual” in character and required the “consistent exercise of discretion and judgment” necessary for the learned professional exemption. The court explained that “what matters is whether they exercise intellectual judgment within the domain of their particular expertise” and that “workers may be found to exercise professional judgment even when their discretion in performing their core duties is constrained by formal guidelines, or when ultimate judgment is deferred to higher authorities.”

In light of these standards, the court explained that the central issue in the case was “whether the undisputed facts demonstrate that Audit Associates practice professional skepticism, in the sense of the judgment characteristic of accountants.” The court answered this question affirmatively, explaining that the plaintiffs’ work duties met this standard because the plaintiffs’ audit duties involved regularly “testing controls, performing inventory reviews, and ultimately replicating the audit process in each work paper.”

The court also found that the plaintiffs were required to employ advanced knowledge “customarily acquired by a prolonged course of specialized intellectual instruction” because they were required to hold accounting degrees and be eligible or nearly eligible for the Certified Public Accountant examination. As a result, the plaintiffs were exempt learned professionals under the FLSA and were not entitled to overtime.

Takeaway: Entry-level accountants who perform the lowest level audit work in an accounting firm may qualify for the learned professional exemption under the FLSA.

About Michael Miller

Michael is a Chambers-rated attorney in Briggs and Morgan's Employment, Benefits, and Labor group and is head of the firm’s Employment Law Counseling and Compliance practice group. He has 25 years experience counseling employers to prevent unwanted litigation and advises companies of ongoing changes in federal, state and local employment law. Michael advises employers in all areas of employment law including discipline and discharge, leaves of absence, wage and hour compliance, non-compete and confidentiality agreements, affirmative action plans, background checking, and drug/alcohol testing. For Michael's full bio, click here.

Posted on September 11, 2014, in Wage and Hour and tagged . Bookmark the permalink. Leave a comment.

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