Campbell v. Pricewaterhousecoopers, Llp
| Decision Date | 11 March 2009 |
| Docket Number | No. CIV. S-06-2376 LKK/GGH.,CIV. S-06-2376 LKK/GGH. |
| Citation | 602 F.Supp.2d 1163 |
| Parties | Jason CAMPBELL and Sarah Sobek, individually, and on behalf of all other similarly situated current and former employees of PricewaterhouseCoopers, LLP, Plaintiffs, v. PRICEWATERHOUSECOOPERS, LLP, a Limited Liability Partnership;, and Does 1-100, inclusive, Defendant. |
| Court | U.S. District Court — Eastern District of California |
Lyle W. Cook, Stuart C. Talley, William A. Kershaw, Kershaw, Cutter & Ratinoff, LLP, Sacramento, CA, for Plaintiffs.
Andrea Lee Brown, David A. Prahl, Julie A. Totten, Norman C. Hile, Orrick Herrington and Sutcliffe LLP, Sacramento, CA, Lynne C. Hermle, Orrick Herrington & Sutcliffe, LLP, Menlo Park, CA, for Defendant.
This is a wage-and-hour action brought by plaintiffs Jason Campbell and Sarah Sobek, individually and on behalf of other similarly situated individuals, against defendant PricewaterhouseCoopers LLP ("PwC"), the largest accounting firm in the world. Plaintiffs allege that PwC misclassified them as exempt employees under California law, failed to pay them overtime, and failed to provide other benefits that an employer must provide to non-exempt employees under California law.
Pending before the court are cross motions for summary judgment or partial adjudication on the issue of whether members of the plaintiff class, unlicensed employees with the position of Attest Associate at PwC's California offices, were properly classified as exempt employees.1 The court grants plaintiffs' motion. PwC's motion further (and separately) challenges plaintiffs' claims for waiting time penalties and for punitive damages. Because plaintiffs have not responded to these challenges, the court concludes that these claims are abandoned, and PwC's motion is granted in this respect.
PwC has over 30,000 employees in its United States offices. In California, PwC maintains six offices, in Irvine, Los Angeles, Sacramento, San Diego, San Francisco, and San Jose. Decl. of Carl Overstreet, ¶ 4. Plaintiff class consists solely of employees of the California offices. The two named plaintiffs, Jason Campbell and Sarah Sobek, were employed by the Sacramento office.
PwC's organizational structure is complex. PwC's professional services are divided into three lines of service, which are designated Assurance, Tax, and Advisory. Overstreet Decl. ¶ 3. The assurance division is further subdivided into the Attest, Systems Process Assurance, and Transaction divisions. The certified class encompasses only employees in the Attest division.
Within the Attest division, there is a seven tiered hierarchy of personnel job titles. From bottom to top, these levels are associate, senior associate, manager, senior manager, director, managing director, partner. Individuals at or above the level of manager are required to hold CPA licenses, whereas associates and senior associates need not be licensed. The Attest division may also employ interns, who work below associates. Plaintiff class consists only of unlicensed associates who are within the Attest division, and work in California offices. In total, the class includes approximately 2000 members.
In essence, the Attest division performs audits. The audits seek to assure that a company's financial statements are prepared in accordance with Generally Accepted Accounting Principles ("GAAP"), and are free of misstatements, whether caused by error or fraud. See Overstreet Decl. ¶ 7. The ultimate recipient of PwC's audit work is the client company's Board of Directors, often through the board's audit committee. These audits demonstrate clients' compliance with various regulatory mandates, and may also provide a necessary predicate for access to investment capital.
In addition to verifying compliance, the Attest division provides some advice to clients. The scope of this advice is limited by statutory and professional independence rules. These rules preclude PwC from performing management functions for clients of the attest division, although PwC may "provide advice, research materials, and recommendations to assist the client's management in performing its functions and making decisions." Decl. of Norman Hile in Supp. PwC's Mot. Summ. J., Ex. 3 (Decl. of Ruben Davila ¶ 45, Appendix J-ET 101-3); see also Decl. of William Kershaw in Supp. Pls.' Reply, ("Kershaw Decl. II") Ex. 1, 114:18-115:9. Consistent with this limit, when PwC identifies deficiencies in the client's accounting in the course of the audit process, PwC communicates such findings, as well as recommendations arising from them, to the client. This communication takes the form of "management letters" that are among the documents delivered to the client at the end of the audit process. PwC's Undisputed Facts Supp. Summ. J. ("UF") 89-90.
PwC refers to the work performed on behalf of a particular client as an "engagement." The team working on an engagement does not persist from project to project, and has no other significance within PwC. Within any particular engagement, associates and senior associates may serve as the "in charge," and some class members have performed this function. PwC's UF 94. The "in charge" reports to and is supervised by the manager, and "helps to manage the day-to-day activities of the engagement." Overstreet Decl. ¶ 16. The "in charge" designation is particular to an individual engagement, and is not a permanent position.
Within the Attest division, all attest associates are unlicensed and assist Certified Public Accountants (CPAs). Attest associates' primary obligation is to verify financial statement items by obtaining and reviewing their underlying documentation.
The parties sharply disagree about the nature of class members' work within the Attest division. Many of these disputes are not material to the present motions, because the court resolves the motions on other predicates. Two questions are salient: the degree of supervision over class members, and whether class members perform work directly related to the internal administration of PwC.
Class members' supervision is mandated by two sets of standards. The first is California Business and Professions Code § 5053, which requires "control and supervision" of unlicensed employees. The second is the professional standards set by the American Institute of Certified Public Accountants, which contains a similar directive. PwC's internal policies confirm that PwC complies with these standards. For example, associates are prohibited from signing documents communicating substantive opinions, conclusions or determinations to clients. Kershaw Decl. II, Ex. 3, PWC 00670; Ex. 4 at PWC 00938 (excerpting PwC's internal documents); see also id. at Ex. 1, 131:13-22; Ex. 2 67:23-77:4, 79:1-8, 123:24-125:2 (depositions of PwC's Fed.R.Civ.P. 30(b)(6) witnesses). In addition, PwC requires that all associate work be subjected to at least one level of detailed review. Id. at Ex. 6, PWC 02770; Ex. 7, PWC 010230. Review "has to include the reviewer being satisfied with both the quality of the work done and the quality of the documentation in the Client file." Id. at Ex. 7, PWC 010230.
PwC argues that class members participate in PwC's internal administration in two ways. Class members have served on internal committees, such as the "Unique People Experience," "Great Place to Work," and "Connectivity" committees. PwC's UF 102. These committees serve essentially social functions, e.g., "to bring people in the Banking group together," Hile Decl., Ex. 14 (Decl. of Ashlee Pierce, ¶ 23) (Unique People) and to improve relationship "between PwC employees and the community, as well as the relationships between various members of the PwC community." Hile Decl., Ex 17 (Decl. of Lambert Shui, ¶ 7) (Great Place to Work and Connectivity). Class members spend a minority of their time on these projects. Pierce Decl. ¶ 23 (), Shui Decl. ¶ 7 ().
Furthermore, some evidence indicates that class members supervise other associates, complete performance evaluations for those they supervise, prepare initial drafts of engagement budgets, and are involved in monitoring budgets. PwC's UFs 95-97, 99-100. Neither party has directed the court to evidence of how much time is spent on any of these activities.
Plaintiffs' claims allege violations of various provisions of the California Labor Code, as well as a violation of California's Unfair Competition Law. California Labor Code section 515(a) authorizes the California Industrial Welfare Commission ("IWC") to "establish exemptions from [these laws] ... for executive, administrative, and professional employees, provided [inter alia] that the employee is primarily engaged in duties that meet the test of the exemption, [and] customarily and regularly exercises discretion and independent judgment in performing those duties." Cal. Lab.Code § 515(a). These exemptions are defined in "wage orders," regulations promulgated by the IWC. More generally, the IWC "is the state agency empowered to formulate regulations (known as wage orders) governing employment in the State of California." Tidewater Marine Western, Inc. v. Bradshaw, 14 Cal.4th 557, 561, 59 Cal.Rptr.2d 186, 927 P.2d 296 (1996) (citing Cal. Lab.Code §§ 1173, 1178.5, 1182), Nordquist v. McGraw-Hill Broad. Co., 32 Cal.App.4th 555, 561, 38 Cal. Rptr.2d 221 (1995).
The IWC has promulgated different wage orders that apply to distinct groups of employees. See Cal.Code Regs. tit. 8, §§ 11010-11170. The parties agree that the regulation applicable to the employees in this case is Wage Order No. 4-2001, covering "Professional, Technical, Clerical, Mechanical and Similar Occupations," published at Cal.Code. Regs. tit. 8, § 11040.
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