Campbell v. Pricewaterhousecoopers
| Citation | 642 F.3d 820,17 Wage & Hour Cas.2d (BNA) 1379 |
| Decision Date | 15 June 2011 |
| Docket Number | No. 09–16370.,09–16370. |
| Parties | Jason CAMPBELL; Sarah Sobek; et al., Plaintiffs–Appellees,v.PRICEWATERHOUSECOOPERS, LLP, Defendant–Appellant. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
OPINION TEXT STARTS HERE
Norman C. Hile, Julie A. Totten, David A. Prahl, Sacramento, CA, Daniel J. Thomasch (argued), New York, NY, Lynne C. Hermle, Menlo Park, CA, Orrick, Herrington & Sutcliffe LLP, for defendant-appellant PricewaterhouseCoopers LLP.William A. Kershaw, Lyle W. Cook, Stuart C. Talley, Kershaw, Cutter & Ratinoff, LLP, Sacramento, CA, David C. Frederick (argued), Silvija A. Strikis, Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC, Washington, DC, for plaintiffs-appellees Jason Campbell, Sarah Sobek, et al.Appeal from the United States District Court for the Eastern District of California, Lawrence K. Karlton, Senior District Judge, Presiding. D.C. No. 2:06–cv–02376–LKK–GGH.Before: RICHARD A. PAEZ * and RICHARD C. TALLMAN, Circuit Judges, and ARTHUR J. TARNOW, Senior District Judge.**
Two thousand unlicensed junior accountants brought this wage-and-hour class action against their employer, PricewaterhouseCoopers LLP (PwC). Among other things, the accountants claim PwC failed to pay them mandatory overtime under California law. The district court granted partial summary judgment to the accountants, finding as a matter of law that PwC could not exempt them from California's overtime requirements. PwC filed this interlocutory appeal.
We must decide whether unlicensed accountants in California are categorically ineligible, as a matter of law, to fall under two state regulatory exemptions from mandatory overtime: the professional exemption and the administrative exemption. We hold they are not. Because the district court erroneously rejected triable defenses under both exemptions at summary judgment, we reverse.
PwC is an international accounting and professional-services firm. PwC is colloquially known as one of the “Big Four” accounting firms,2 employing over 30,000 people in the United States. PwC maintains six California offices, in Irvine, Los Angeles, Sacramento, San Diego, San Francisco, and San Jose.
PwC's professional services are divided into three lines: Assurance, Tax, and Advisory. The Assurance division is further divided into three subdivisions: Attest, Systems Process Assurance, and Transactions. Within the Attest division, there are seven tiers of personnel job titles. From top to bottom, those tiers are: partner, managing director, director, senior manager, manager, senior associate, and associate. Employees in the first five tiers are required to hold Certified Public Accountant (CPA) licenses, but senior associates and associates need not be licensed.
Jason Campbell and Sarah Sobek represent a class of junior accountants (collectively Plaintiffs) currently or formerly employed by PwC. Plaintiffs now work or previously worked in PwC's six California offices as associates in the Attest division. They do not or did not then have CPA licenses. The class includes approximately 2,000 members.
As Attest associates, Plaintiffs help perform audits for PwC's many clients. These audits ensure the client's financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP). The ultimate recipient of PwC's audit work is the client's Board of Directors. In addition to verifying compliance with GAAP, the Attest division also provides professional advice to clients, including identification of deficiencies in the client's accounting practices.
PwC refers to the auditing of a particular client as an “engagement.” The team working on an engagement does not persist from project to project. During any particular engagement, an associate or senior associate may be designated as the “in charge,” a designation that does not last beyond that engagement. Some Plaintiffs have performed this function. The associate “in charge” reports to the manager and helps manage the day-to-day activities of the engagement.
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. Named-plaintiff Sobek described her work as “comparing one number to another number to see if they agree.... a very tedious activity.” Plaintiffs also characterize their responsibilities as “sitting at [a] computer, going through highly routinized and nondiscretionary Steps.”
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.
While working for PwC, Campbell and Sobek each received some criticism over their job performance. In addition to the mistake described above, Campbell earned a “Less Than Expected” rating during his 2006 annual performance review. Sobek received the same rating during her 2005 review. More generally, PwC alleges both named-plaintiffs consistently fell below the firm's expectations for Attest associates.
Campbell was terminated by PwC in 2006 for poor performance. Sobek resigned from the firm that same year. They brought this diversity action under the Class Action Fairness Act (CAFA), 28 U.S.C. § 1332(d), alleging various violations by PwC of California wage-and-hour laws.
Under 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. Cal. Lab.Code § 510(a). However, the Industrial Welfare Commission (IWC), a California state agency, may promulgate exemptions from mandatory overtime. Id. § 515(a). The IWC promulgates these exemptions in “wage orders,” state regulations enforced by the California Division of Labor Standards and Enforcement (DLSE).3 The current IWC wage order is Wage Order No. 4–2001 (the 2001 Wage Order), codified at California Code of Regulations title 8, section 11040. The 2001 Wage Order establishes three overtime exemptions: the professional exemption, the executive exemption, and the administrative exemption. Cal.Code Regs. tit. 8, § 11040(1)(A)(1)-(3).
In the district court, the parties cross-moved for partial summary judgment on whether Plaintiffs fell under any of these three overtime exemptions. The district court ruled for Plaintiffs, finding as a matter of law that PwC could not exempt them under the 2001 Wage Order. Campbell v. PricewaterhouseCoopers, LLP, 602 F.Supp.2d 1163, 1185 (E.D.Cal.2009). In relevant part, the court concluded that (1) unlicensed accountants are categorically ineligible for the professional exemption, id. at 1180–81; and (2) PwC had not established a triable fact issue on whether Plaintiffs' work was performed “under only general supervision,” an essential element of the administrative exemption, id. at 1182–85.4 Recognizing the importance of the exemption issue to this litigation, the court certified its order for interlocutory appeal under 28 U.S.C. § 1292(b). Id. at 1186. We granted certification, and PwC now appeals.
We review de novo a district court's decision on cross-motions for summary judgment. Avery v. First Resolution Mgmt. Corp., 568 F.3d 1018, 1021 (9th Cir.2009). Summary judgment is appropriate when, viewing the evidence in the light most favorable to the nonmoving party, there are no genuine questions of material fact and the district court correctly applied the underlying substantive law. Id.
In California, overtime exemption is an affirmative defense that must be pled and proved by the employer. Ramirez v. Yosemite Water Co., 20 Cal.4th 785, 85 Cal.Rptr.2d 844, 978 P.2d 2, 8 (1999). To defeat summary judgment, the employer must establish a material fact question on each essential element of the defense. See Fed.R.Civ.P. 56(a), (e)(3).
We begin with the professional exemption. The district court found that unlicensed accountants are categorically ineligible for the exemption as a matter of law, and thus Plaintiffs cannot fall under the exemption because they are not licensed CPAs. This conclusion is contrary to the exemption's text and structure and would produce highly problematic precedent affecting several non-accounting professions. For that reason, we tread carefully in our analysis of the issue.
IWC wage orders are “quasi-legislative regulations” that must be construed “in accordance with the ordinary principles of statutory interpretation.” 5 Singh v. Superior Court, 140 Cal.App.4th 387, 44 Cal.Rptr.3d 348, 351 (2006). When interpreting a statute, our goal is to ascertain the intent of the enacting legislative body. Martinez v. Combs, 49 Cal.4th 35, 109 Cal.Rptr.3d 514, 231 P.3d 259, 268 (2010).
The district court appropriately focused its statutory analysis on the first two subsections of the 2001 Wage Order's professional exemption. Those two subsections provide:
(3) Professional Exemption[:] A person employed in a professional capacity means any...
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