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Do you know whether you have to pay your employees overtime wages?

Powerhouse auditing firm PricewaterhouseCoopers recently found out the hard way when the 9th Circuit held that unlicensed junior accountants —  the young accountants who perform the auditing work—may be classified as non-exempt employees. See Campbell v. PricewaterhouseCoopers, LLP, —F.3d—, 2011 WL 2342740 (9th Cir., June 15, 2011) [].

What does it mean to be exempt?

Whether an employee is exempt or non-exempt affects the employer’s obligation to pay overtime. In California, if a non-exempt employee works over 8 hours per day, or over 40 hours in week, then the employer must usually pay time and a half—that is, 1.5x regular wage rate multiplied by the number of overtime hours. Depending on the employee’s hourly wage, frequency of overtime work, and the employer’s number of employees, overtime wages can add up to large amounts.

But if an employee is correctly classified as exempt, then the employer does not have to pay overtime, no matter how many hours the employee works.

Obviously, employers have an interest in classifying employees as exempt where possible. However, employers cannot willy-nilly declare all employees exempt, and misclassifying employees can lead to significant penalties for the employer.

California law generally exempts employees who have executive functions (such as the CEO), administrative functions, and professional functions from overtime pay. The California Labor Commissioner has a list of exempt employees.

What does this mean for you?

PwC argued the junior accountants should be exempt from overtime pay under the administrative exemption or under the professional exemption. The 9th Circuit disagreed and held that the junior accountants are not “categorically ineligible” from being non-exempt. Slip op. at 1. That’s a lot of double negatives. Basically, the court reiterated that classifying an employee as exempt depended on the specific facts of the case and that it was possible for a court to find that junior accounts were non-exempt.

For employers, Campbell raises the specter of the risk of misclassifying employees. If the district court finds that the junior accountants are non-exempt, then PwC may be liable to thousands of junior accountants for unpaid wages going back up to four years before the lawsuit was filed. That’s a lot of money at stake.

So, bottom line, if you do not know whether your employees are exempt, check with an attorney to analyze the facts and make sure you’re not incurring possible liability.  If you think you are improperly classified, talk with an attorney familiar with California’s overtime laws.

The Law Office of Phillip J. Griego
95 South Market Street, Suite 520
San Jose, CA 95113
Tel. 408-293-6341

Original article by Kate Bowerman, Summer Intern at The Law Office of Phillip J. Griego.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law, but we cannot answer questions about specific situations or provide legal advice. If you desire legal advice, you should contact an attorney.
Your use of this blog does not create an attorney-client relationship between you and the Law Office of Phillip J. Griego. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be posted in this blog and the Law Office of Phillip J. Griego cannot guarantee the confidentiality of anything posted to this blog.Phillip J. Griego represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.