FLSA litigation generally moves from industry-to-industry, and, in the most recent wave of litigation, one of the hardest hit industries has been the accounting profession, particularly the “big four” accounting firms, which have been subjected to large-scale challenges of their classification of junior accountants as exempt. Typically, these individuals hold accounting degrees and work on massive audit projects for their employer. However, in many instances, some of these employees have not yet received the CPA credential, giving rise to an argument that they are not yet performing exempt accounting work. Rejecting this interpretation of the FLSA regulations in a lengthy opinion, Judge Colleen McMahon of the Southern District of New York recently concluded that KPMG’s junior accountants, dubbed Audit Associates, qualify for the learned professional exemption. Pippins v. Kpmg Llp, 2012 U.S. Dist. LEXIS 173918 (S.D.N.Y. Nov. 29, 2012).
In Pippins, Judge McMahon addressed the two key prongs of the learned professional exemption’s duties test, namely: 1) the performance of work requiring advanced knowledge in a field of learning, customarily required through prolonged academic instruction; and, 2) the exercise of discretion and independent judgment. As to the former, Judge McMahon engaged in an extensive analysis of the 1,096 Plaintiffs in Pippins, and determined that each and every one of them had the requisite accounting background and education at time of hire (and almost all of them had required that background through a degree program). This established that the work performed by Audit Associates required the requisite accounting training and knowledge. As to the discretion and independent judgment wielded by Audit Associates, the Court observed that these young accountants, like “young doctors or young lawyers or young architects or young engineers or other young professionals who are just embarking on their careers” performed “some fairly mundane tasks” in the course of their work, but found that they were “expected to exhibit ‘professional skepticism’ throughout all aspects of their audit work and be on the constant lookout for indications of fraud or misstatements as they perform audit procedures.” “In other words,” wrote the Court, “they are expected to act like bona fide accountants in everything they do.” Thus, they were properly classified as exempt accountants.
Pippins constitutes a victory for the accounting industry. We will continue to apprise of any developments in these ongoing litigations, including any appeal of the Pippins decision, or clarification regarding the arbitrability of the similar claims alleged against Ernst & Young. Sutherland v. Ernst & Young LLP, 768 F. Supp. 2d 547 (S.D.N.Y. 2011)(denying motion to compel arbitration of “low level accountant[‘s]” FLSA claim), 2d Cir. Docket No. 12-304.