Human Capital & Careers

Overtime Pay for PwC Audit Associates?

A class-action suit will proceed in California, but senior associates and employees in the firm's tax and consulting arms are excluded from the class.
David McCannMarch 28, 2008

A class-action lawsuit charging that PricewaterhouseCoopers misclassifies auditors without CPA licenses as exempt employees who are ineligible for overtime pay can proceed, a federal court in California has ruled.

The lead plaintiffs, two former PwC employees, contend that the firm should pay overtime and other benefits to all unlicensed associates and senior associates. But while the lawsuit made this claim on behalf of such employees in all of PwC’s main business lines — assurance, tax, and advisory — the court chose to certify only a portion of the proposed class: associates in the attestation division of the firm’s assurance line. All others, including senior associates in the attestation division, will remain ineligible for overtime.

At issue in the case, which applies only to PwC’s operations in California, is whether the unlicensed employees exercised independent judgment and discretion in performing their duties and whether they performed intellectual work. That will now be decided at trial with respect to the auditing associates.

In explaining why it certified only that partial class, the court wrote: “There appear to be significant differences between the work required by an audit versus the work involved in securing a client’s IT infrastructure, or in creating tax provisions for a trust.” The court also took into account that the lead plaintiffs themselves were in the audit division. “Regardless of how the issue is framed, the fact remains that plaintiffs have virtually no knowledge of what associates in other divisions do,” it wrote.

PwC said in a statement that it “continues to believe that no class should be certified in this matter. Nonetheless, the firm is gratified the court has rejected plaintiffs’ broadly proposed class and has restricted class members only to associates in one practice division. PwC greatly values all of its employees and believes the firm’s associates and senior associates are appropriately classified as exempt under California law.”

The court also certified the case for immediate appeal by PwC, and in fact encouraged it because of the complexity of the issues involved. “There is substantial ground for difference of opinion, and an immediate appeal…will materially advance the ultimate termination of the litigation,” the court wrote. PwC said, though, that it has not yet decided whether to appeal.

A similar case is active in California against Deloitte & Touche. A motion for class certification is expected to be filed in June after depositions and employee surveys have been completed, according to Deloitte attorney Armond Marcarian. The trial is set for October.

California has long been considered an employee-friendly state and, as a result, has been the site of several key overtime suits involving white-collar workers. For example, last May a class-action suit was filed in California against IBM by current and former sales representatives who charge the company denied them overtime. However, a judge dismissed the suit because the lead plaintiff reportedly signed a severance agreement promising not to take legal action against the company, noted InformationWeek. In 2006, however, IBM agreed to pay $65 million to more than 32,000 technology specialists to settle charges that it improperly exempted employees from receiving overtime pay.

Older suits illustrate the state’s relatively long history of legal challenges related to overtime rules. For example, in September 2005, insurer Allstate Corp. announced it would pay as much as $120 million to settle claims that it refused to pay its California employees for working extra hours during nights and weekends. In February of that same year, reported that a spate of similar overtime suits hit Silicon Valley companies, including Electronic Arts, Oracle, IBM, and Pacific Software.

The rise in overtime suits in the Golden State may have been prompted by the passage of California’s 2004 Private Attorneys General Act, which gives employees the right to sue their employers to enforce the state’s labor code. What’s more, that same year federal labor laws were updated to make several new groups of white-collar workers eligible for overtime pay. The Labor Department now estimates that 86 percent of the U.S. work force, or 115 million employees, is eligible to receive overtime pay, according to a report in BusinessWeek.