November 20, 2018

The Big 4 Loves the SCOTUS Decision on Arbitration

Hope you like those mandatory arbitration clauses in your employment contracts:

The U.S. Supreme Court delivered a blow to the rights of workers on Monday by allowing companies to require them to sign away their ability to bring class-action claims against management, agreements already in place for about 25 million employees.

The justices, in a 5-4 ruling with the court’s conservatives in the majority, endorsed the legality of the growing practice by companies to compel workers to sign arbitration agreements waiving their right to bring class-action claims on various disputes, primarily over wages and hours.

Wage and hour lawsuits are a topic we’ve covered extensively on Going Concern, since the early days of the site, as well as the emergence of mandatory arbitration. But this ruling will likely put the nail in the coffin of wage and hour lawsuits brought by unlicensed accountants. The clauses dictate that anyone wishing to resolve a complaint against their employer will have to do so individually and waive their right to litigate them in court. This will make it virtually impossible for anyone to pursue their claims effectively.

What recourse do unlicensed accountants have? Not much, unless they decide to unionize like EY Israel did. Of course, the 150-hour credit requirement to sit for the CPA exam all but assures that more and more accounting students will pursue master’s degrees, making it increasingly likely that the vast majority of entry-level hires will be “learned professionals” and ineligible for overtime.

Francine McKenna shared a theory three years ago about the Big 4’s strategy:

I predict the largest public accounting firms will mandate a Masters Degree in Accounting to be hired and disqualify anyone with only an undergraduate degree, whether or not they have the required 150 credit hours. The largest public accounting firms will expect passing grades on all parts of the new bar-exam style CPA exam before a full-time start. In addition to passing the exam, most jurisdictions also require between 1–2 years of experience doing audits on the job in a public accounting firm to be licensed as a CPA. If graduates start full-time employment with the exam already nailed, within 1–2 years, depending on state law, everyone is licensed. (I wouldn’t be surprised if the firms start lobbying to reduce experience requirements on the strength of their significant, quality ongoing in-house training programs that meet continuing professional education requirements to remain licensed now.)

When all this is in place, the largest public accounting firms will have closed the window on vulnerability to any new class action overtime lawsuits brought by entry level auditors.

KPMG’s fancy master’s program requires participants to stay with the firm for three years; that’s plenty of time to get certified. Now with SCOTUS’s help, and a business-friendly government, all the pieces are falling into place for the Big 4 to smote any chance for employees to bring overtime lawsuits.

[Reuters, Medium]

Image: UpstateNYer/Wikimedia Commons

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