In Campbell v. PricewaterhouseCoopers, LLP, 642 F.3d 820 (9th Cir. 2011), the Ninth Circuit considered whether 2,000 unlicensed accountants in California who had sued PricewaterhouseCoopers LLP were categorically ineligible to fall under two exemptions to California’s overtime laws—the professional exemption and the administrative exemption—and concluded that they were not, reversing the trial court’s grant of summary judgment in favor of the plaintiffs.

The Court first explained that “[u]nder the California Labor Code, employers must generally pay mandatory overtime to any employee who works more than eight hours a day or forty hours a week.”  Id. at 824.  The burden is on the employer to prove that it has properly classified an employee as exempt from the overtime laws.  Id. at 825 (“In California, overtime exemption is an affirmative defense that must be pled and proved by the employer.”).

The Court further stated that “Plaintiffs and PwC disagree sharply about the nature of Plaintiffs’ work during an engagement.  Plaintiffs claim their work is predominately routinized and menial.  They argue that strict instructions, comprehensive computer auditing software, and an extensive work-review system all preclude them from exercising any significant degree of discretionary judgment or analytical thinking. . . . PwC, on the other hand, argues Plaintiffs perform analytical work ‘integral’ to PwC’s Attest services.  To the extent Plaintiffs do not regularly exercise discretion and independent judgment during an audit engagement, PwC says they are failing to meet the firm’s expectations.  PwC emphasizes the variety of duties performed by Plaintiffs during an engagement and claims the failure to perform those tasks adequately can have ‘significant consequences’ for PwC’s clients.  During one engagement, for example, named-plaintiff Campbell overlooked approximately $500,000 in the client’s unrecorded liabilities.  This oversight, which Campbell himself described as a ‘serious error,’ was ultimately discovered by another team member.  The error required a late financial adjustment and made the client unhappy.”  Id. at 823-24.

Turning to the issue of exemptions, with respect to the professional exemption, the Court rejected the argument that unlicensed accountants could never satisfy that exemption’s eligibility requirements, finding that “[t]o conclude otherwise would require us to ignore the potential for substantial variance from one unlicensed accountant to another.  Even within PwC alone, the record indicates significant differences in skill level, responsibility, and experience between Attest associates and senior associates, both of whom may be unlicensed.”  Id. at 828

With respect to the administrative exemption, the Court explained that this exemption requires the employer to prove the following five elements:

  1. The employee performs work directly related to management policies or general business operations’ of either the employer or the employer’s clients [that is of substantial importance to management or business operations];
  2. The employee ‘customarily and regularly exercises discretion and independent judgment’;
  3. The employee works ‘under only general supervision’ while either: (1) performing work along specialized or technical lines requiring special training, experience, or knowledge, or (2) executing special assignments and tasks;
  4. The employee is ‘primarily engaged’ in exempt work meeting the above requirements; and
  5. The employee meets a minimum salary requirement.

Id. at 830-31 (citing Cal. Code Regs. Section 11040(1)(A)(2).

The Court stated that based on the evidence presented by the parties, “we cannot conclude as a matter of law that all unlicensed accountants are necessarily subject to more than general supervision,” rendering the exemption inapplicable to the plaintiffs.  The Court also stated that “[t]he more important question, and the one the jury will need to resolve, is whether Plaintiffs’ work for PwC’s clients during audit engagements is of ‘substantial importance’ to the management or operations of the clients’ businesses.  This inquiry will be fact-intensive . . . . While we recognize Plaintiffs are on the low end of PwC’s hierarchy, we see no authority that would bar their audit work from meeting this test as a matter of law.”  Id. at 832-33.

The Court’s decision leaves it to a jury to decide whether PwC improperly classified these employees and failed to pay them overtime in violation of California’s overtime laws.


Bernstein & Friedland, P.C. is a boutique employment law firm in Los Angeles specializing in wrongful termination, discrimination, harassment, retaliation, and unpaid wage and overtime matters.  Please visit our website at to learn more about us.

Polina Bernstein

Polina Bernstein

Polina Bernstein founded Bernstein & Friedland, P.C. in 2009 and is lead litigation counsel at the firm.

Diana Friedland

Diana Friedland

Diana Friedland is a partner at Bernstein & Friedland, P.C. Her practice focuses on employment litigation and counseling.

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