• Big 4

    The Latest Twist in Overtime Lawsuits Against Accounting Firms

    By | October 8, 2013

    Here's an interesting development in the wage and hour disputes between public accounting firms and their unlicensed staff. The Second Circuit Court of Appeals recently found that "class action waivers" included in offer letters to new associates are enforceable. What does that mean exactly? The case Sutherland v. Ernst & Young provides the background:

    “Alyssa” worked as an audit employee responsible for training and “low-level clerical work” for Ernst & Young, LLP in New York from September 2008 through December 2009 at a fixed salary of $55,000 per year. Upon accepting the job, Alyssa signed an offer letter stating that any “dispute … arising between myself and the firm will be submitted first to mediation and, if mediation is unsuccessful, then to binding arbitration.”
    In other words, there was an explicit process laid out in the offer letter that explained how disputes between the firm and an employee are dealt with:
    Step 1: Get someone impartial involved to help resolve the differences because, let's be adults about this.

    Step 2: Get someone impartial involved who will make a decision because people don't want to be adults about this.

    Pretty standard. But then there's this:
    An attachment described the firm’s alternative dispute resolution program, which provided that “neither the firm nor an employee will be able to sue in court in connection with a covered dispute,” and “covered disputes pertaining to different [employees] will be heard in separate proceedings.”
    Okay, so this is the part where the firm said, "Hey, if you have a problem with us, fine. But we're not going to let you drag other people who claim to have the same problem into this mess." By signing this offer letter, Alyssa gave up the right to rally a bunch of people to her cause. 
    Be that as it may, Alyssa argued that going solo was not an option:
    After a year on the job, Alyssa filed a lawsuit claiming she was misclassified as exempt and seeking $1,867 in unpaid overtime wages under the Fair Labor Standards Act (FLSA) and New York labor law. She also sought class certification for other clerical employees. Alyssa argued that she could not “effectively vindicate” her rights in individual arbitration because the cost would far exceed her potential recovery, with estimated attorneys’ fees of $160,000, personal costs of $6,000, and expert testimony fees of $25,000.
    The district court agreed with this argument based on the Second Circuit's rulings in In re American Express Merchants’ Litigation (Amex I-III)1 and said that the waiver prevented Alyssa from rightfully pursuing the claim. EY didn't like this and appealed, naturally. That's when the Second Circuit overturned the district court's decision citing a recent SCOTUS case:
    “Amex I and the subsequent decisions that followed in our Circuit are no longer good law in light of the [U.S.] Supreme Court’s recent decision in American Express Co. v. Italian Colors Restaurant.”
    In Italian Colors, the Supreme Court held that “the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy,” and reminded lower courts to “rigorously enforce arbitration agreements according to their terms.”

    That last part is tough but what SCOTUS said, and what the Second is applying to Sutherland, is that it doesn't matter if Alyssa can't "effectively vindicate" that "the cost would far exceed her potential recovery" because an agreement is an agreement and therefore, the terms should be enforced.

    On the one hand, the decision seems logical and it just goes to show how meticulously crafted those offer letters are. On the other, this does not look good for the plaintiff in this case and will hold a lot of repercussions in any future claims. 

    In short: read those offer letters closely. None of the terms are likely to be a dealbreaker for you, but it's best to be aware of the conditions that come with your employment.   

    1 Go here for some good background but the gist is "the U.S. Court of Appeals for the Second Circuit held […] that an arbitration clause is void if individual arbitration would make it financially unfeasible for a plaintiff to vindicate federal statutory rights."

    Court of appeals: Class action waivers are enforceable [hr.blr.com]

    • $56523509

      Yet another example of how our Supreme Court tirelessly works to defend the rights of giant corporations, just as the founding fathers intended.

      If you don’t want to pay $160k in legal fees to get the $2k EY! jerked you out of, that’s your problem. This really should serve as a warning. If American workers continue being uncooperative like this “Alyssa” bitch, corporations may just send all the jobs overseas where they can pay children $2 for a 12 hour shift.

      I’ve said it once and I’ll say it again: The Big 4 always win.

      • guest

        Scalia Thomas Inc is responsible for stripping any and all class actions and making it nearly impossible to hold accountable an employer who breaks the law. The thresholds are too wide for any small group on individuals to cross now. Although I hear Kassman v KPMG was allowed to go forward but probably only for the entertainment of the Emperors of the Court

      • AAronBalake

        Accept the terms in the offer letter or be unemployed….hmmmmm. Granted, the terms in the offer letter blow, however, if the choice is unemployment, as they say, you’re in between a rock and a hard place.

    • Tax Nerd

      Mandatory arbitration clauses are fucking bullshit.

      Everyone should watch the documentary Hot Coffee, for why they suck. (Bonus: pics of the painful-looking burns from the woman who spilled coffee on herself in the legendary McDonalds case. )

      • Rtruth12

        I second that. Excellent documentary. I now cringe when I hear the words “tort reform”

    • Gu

      These overtime lawsuits are as ridiculous as when Kramer sued because he spilled hot coffee on himself. You know going in that it isn’t an 8 to 5 job and that busy season is going to suck.

      • $56523509

        We are a nation of laws. Or at least we’re supposed to be.

      • Guest

        If you think these lawsuits are ridiculous, then work to repeal the Fair Labor Standards Act. It’s not frivolous to expect EY to obey a law that’s been on the books for 80 years.

      • anon

        Yes, going in people know its not an “8-5 job and busy season is going to suck”, as you put it. However, Big 4 recruiters very often mislead candidates about just how bad the hours are. Second, we all know the hours have been getting worse every year. Third, with the technology we have (smart phones, internet) when are we truely “off the clock”? Last, and certainly not least, is the issue of “billable hours” vs “total hours for the firm”.
        All those hours spent in training aren’t chargable, and firm doesn’t give fuck about them, but it is time you spend WORKING. All those hours we spend on Saturday/sunday catching up emails are horus the firm doesn’t give a fuck about, but its time you spend WORKING.
        The concept of a salaried position is largly intended to ease the burdon on employers for tracking the working time of people in management. The logic being: they manage, they work all the time, tracking their hours isn’t practical.
        However, that concept is still intended to operate within the “typical 40 hour workweek”, to a large degree. The idea is to put someone on salary because they are a manager/professional because they ussually work 45-50 hours a week.
        The concept was not intended, and never should be used to include the concept of, “put some young inexperianced hire on salary and make them work 80 hours a week”.
        The trend with the professional service firms (Accounting, consulting, banking, law) has become much more of the latter in recent years (i.e. 15-20yrs).

        • Reasonable Assurance

          This several times over. Several 80h work weeks in a row will change most peoples minds unless they are high on firm koolaid or don’t enjoy their personal lives.

          • AAronBalake

            I love koolaid.

          • Guest

            What is a personal life?

            • Reasonable Assurance

              Good question, most accountants probably think having (2) days off a week is special.

        • AAronBalake

          Are you speaking from a strictly assurance standpoint? To my understanding: there are “exempt” and “non-exempt” contracts. With the non- exempt, while you are on a salary, anything over the normal 40 hour work week is OT (as long as it is client work) and OT is time and a half (even though you are technically on a salary). With exempt contracts (which you don’t become exempt until you reach the manager level (in big 4)) you’re on salary and there is no OT, you are just expected to work until work is done.

          To your point about recruiters swaying new hires into believing that hours are a standard 40 hour working week, yes, recruiters do sell a lot of bull shit.

          To your point about smart phones and asking the question “are we ever really ‘off the clock?'” that’s a good question to ask. My firm sent out an email explaining that just because we have firm provided phones, to “not feel tempted to check work emails when not at the office or on vacation” but in reality, we are never really off the clock. We are almost always expected to be easily accessible.

          • anon

            AAron, I’m sorry but you are simply wrong about the classification of exempt vs non-exempt at the Big 4. I’ve worked at PwC and Deloitte, and I have been classfied as an exempt (i.e no overtime) employee at both places and I am below the manager level. While there are some smaller firms that do offer to pay overtime to their employees, that is at the sole discretion of those firms and they are not required to do so by any laws (all legal debates about this issue aside). To my knowledge non of the big 4 firms pay for overtime for their professional staff.
            The problem that the people filing the lawsuits have is in the liberal use of the exempt classification that the firms apply to their employees. Federal regulations require very specific guidlines for the use of that classification. Simply being a “degreed professional” does not qualify under the law. Is the individual a manager/supervisor? Is the individual consistently making complex descisions as part of their normal work?
            The firms pay interns at an hourly rate because they are non-degreed monkeys. I would argue in the vast majority of cases that 1st/2nd years are simply degreed monkeys, and I think most people would believe that. In fact, I would argue that any position below the manager level doesn’t really meet the rules for classification as an exempt employee regardless of whether they are a CPA or not. Why? because they are being directed in their day to day tasks, rather than doing the directing.
            The fact that the courts are now relying on the employee agreements to throw these suits out of court is, quite frankly, bullshit. The employees are effectivly strong-armed into signing these agreements or they will not get an offer of employement. The agreements are worded in such a way that the employer holds all the cards. It is simply unfair, and the courts have consistently found that contracts signed under such terms and conditions are invalid. I suspect the plantiffs in these cases will soon start to make this arguement.
            On the surface to people that understand labor laws, the issue pretty cut and dry. These employees are due overtime, and should be treated as exempt employees. The firms are fighting that and doing a good job of it, but all their effort has to be spent on keeping the case from really being heard. Because, once it does actually gets to court, the firms don’t stand a chance on the merits.
            Frankly, I’m surprised the IRS and the government hasnt gotten involved because if the firms are found to owe back wages, there will also be back taxes associated with it, along with penalties for non-payment of those taxes.

            • Pinkerton

              You don’t have to be a manager or supervisor to qualify under the professional exemption (http://www.dol.gov/whd/regs/compliance/fairpay/fs17d_professional.pdf). The regulations are actually quite broad.

              Accountants aren’t lawyers and we shouldn’t pretend to be.

            • AAronBalake2

              I’m wrong? I wonder how it is that I work at a big 4 firm and get paid OT….maybe because i’m advisory.

        • Guesty

          Everyone at the Big 4 are “at will” employees and can leave anytime they want. I’m so sick of whiny pusses bitching about their hours. You knew what you were getting into when you accepted the job, and if you didn’t, you are nothing more than a prior period recruiting error, as you are too fucking stupid to work in the Big 4,

    • standard workweek is 80 hours

      only $1,867 in overtime? that seems like a lot lower than what it should be for working for 14 months….even if you say the standard workweek is 50 hours…

    • hahahaha

      What kind of a moron files a lawsuit where they would lose their job that pays $55K a year in order to win $1867………how thick do you get