Federal Court of Appeals Rules
Entry-Level Accountants Exempt
Second Circuit Holds They
Get no Overtime
No Advanced Degree or CPA required;
Undergrad degree in Accounting Enough
As a practical matter most corporations will hire junior accountants fresh out of college as salaried professionals, or even classify as an “accountant” an office bookkeeper who is “salaried” and paid the same amount of money each week regardless of the hours worked.
In a class action overtime case, Pippins v. KPMG, __F3rd__, 13-889 (2nd Cir. July 22, 2014), the Second Circuit Court of Appeals found that entry-level accountants presumptively had the “advanced knowledge” that permitted their employer to classify them as exempt professionals under the Fair Labor Standards Act. The court found that junior accountants can be professional exempts because they “exercise professional judgment when their discretion in performing core duties is constrained by formal guidelines or when ultimate judgment is deferred to higher authorities.” The fact that the employees were supervised by senior colleagues, under a codified standard operating procedure in many KPMG offices, did not make the plaintiff a non-professional staff person.
The plaintiffs were “audit associates” that received extensive training in the specialized field of auditing after they were hired, rather than at college. They argued that they spent substantial amounts of time filling in templates created by KPMG, and otherwise gathering and compiling information from clients. The court found that junior accountants need not have CPAs or advanced degrees in accounting to be exempt.
The court declined to assign the administrative exemption to the junior accountants because this exemption under the FLSA requires a greater exercise of discretionary management authority (“independent judgment”) than the professional category. The court also noted that the Wage and Hour Administrator has acknowledged that the judgment standard for professional exempts was less stringent.