KPMG Scores a Major Victory in the War Against Overtime

This just in, your dreams of collecting overtime for all your hard work have been summarily crushed in appeals court.

We've been following Pippins v. KPMG for quite some time, as its outcome could have been a real game changer for everyone. Well, too bad, the game shall hereby remain the same.

The idea, in case you haven't been paying attention, is that a bunch of KPMG audit associates got together and realized they were getting ripped off under the Fair Labor Standards Act, which "mandates, inter alia, that employers pay additional compensation at a higher rate to employees who work more than forty hours per week." Well dang, if that's the case, how do firms get away with not paying associates overtime?

Easy. They don't have to, says the appeals court.

Judge Colleen McMahon, in a 51-page opinion, concluded "that because plaintiffs were employed as accountants, a profession in a field of advanced science and learning, deployed knowledge that is customarily acquired by a prolonged course of specialized education, and exercised professional discretion and judgment, they were exempt from the FLSA provisions."

In order to be exempt from FLSA, the employer must meet a three pronged requirement:

[T]he work must be (1) "predominantly intellectual in character, and . . . requir[e] the consistent exercise of discretion and judgment," id. § 541.301(b); (2) in a "field of science or learning," which includes accounting, id. § 541.301(c); and (3) of a type where "specialized academic training is a standard prerequisite for entrance into the profession," id. § 541.301(d).

The Plaintiffs argued that the only requirement met was the fact that they worked in accounting, but basically started at KPMG not knowing a debit from a credit:

Plaintiffs do not dispute that they worked in the field of accounting, and that the second requirement for application of the exemption is satisfied. They contend, however, that the other two requirements are not satisfied, arguing that their work does not require specialized academic training or involve the consistent exercise of advanced knowledge or professional judgment. Plaintiffs contend that Audit Associates receive all the training necessary to perform their function after their arrival at KPMG, rather than through a prior course of intellectual instruction, and that they do not exercise specialized knowledge or professional discretion in performing their duties because they primarily perform low-level, routine work. KPMG responds that Audit Associates, while entry-level, perform tasks that require the informed judgment characteristic of the accounting profession, and rely on skills and knowledge obtained through specialized prior education directed towards professional accountancy accreditation.

You should read the entire thing but the part you need to know is that the court determined associates are educated professionals, if at the entry level. Therefore, no overtime for you!

We thus conclude that, for the purposes of 29 C.F.R § 541.301, Audit Associates are learned professionals who perform work requiring advanced knowledge requiring the consistent exercise of discretion and judgment, and who have customarily received this advanced knowledge through a prolonged course of specialized intellectual instruction. They are thus learned professionals, and exempt from the FLSA overtime requirements. Having found the plaintiffs' other arguments to be without merit, the judgment of the district court is AFFIRMED.

The original case is "Kyle Pippins, et al., v. KPMG LLP," in the Southern District of New York, Case No. 1:11-cv-00377-CM-JLC. The appeals case is "Kyle Pippins, et al., v. KPMG LLP," in the United States Court of Appeals, Second Circuit, Docket No. 13-889-cv.

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