Affirming a highly-publicized 2012 decision from Southern District of New York Judge Colleen McMahon, the Court of Appeals for the Second Circuit ruled last week that audit associates employed by “Big Four” accountancy KPMG qualified for the learned professional exemption from overtime under the FLSA. Pippins v. Kpmg Llp, 2014 U.S. App. LEXIS 13997 (2d Cir. July 22, 2014).
In Pippins, the Circuit analyzed whether audit associates exercised “discretion and judgment” demonstrating the use of “advanced knowledge,” and whether, as a group, they did so in the recognized profession of accounting by utilizing advanced knowledge customarily acquired through prolonged academic instruction. As concerned the use of discretion and judgment requiring use of advanced knowledge, the Court determined that “Plaintiffs’ own description of their work indicates that they collected and analyzed information from clients and produced written work product requiring judgment analogous to that exercised by [employees found to be learned professionals in other contexts], and that the[y] . . . did more than tabulate data or maintain books.” To characterize this work as not requiring discretion and judgment, in the Court’s view, was “to confuse being an entry-level member of a profession with not being a professional at all.”
As to whether the advanced knowledge was acquired through prolonged academic instruction, because the record demonstrated that substantially all of the audit associates had relevant accounting degrees and were on the cusp of qualifying for the CPA credential, the Court concluded that this prong of the test was met. The Court framed the “critical inquiry [a]s not whether there might be a single Audit Associate who does not satisfy a specific set of academic requirements, but whether the ‘vast majority’ of Audit Associates required a prolonged, specialized education to fulfill their role as accountants.” In the case at bar, KPMG established the Audit Associates’ “formidable educational qualifications [rendering] it . . . indisputable that the vast majority of Audit Associates received such an education.”
Pippins is a welcome decision for the industry and reiterates the core principles of the learned professional exemption: the need to exercise professional judgment in a duly recognized profession obtained through prolonged academic instruction. Employers classifying workers as learned professionals must analyze the nature of the profession, the requisite educational prerequisites and the professional judgment exercised in the role.