CaliforniaThe classification of employees as exempt vs. non-exempt frequently presents challenges for employers. The risks of classifying an employee as exempt if that exemption is found to be incorrect are substantial, because both state and federal law are strict and impose substantial penalties. These penalties can be enforced by private litigants. Lawsuits (including class actions) over wage and hour issues have become common in California.

Both state and federal law provide exemptions for "professionals," but under both bodies of law, the burden is on the employer to justify the exemption. The professional exemption applies to licensed or certified employees in specific fields (law, medicine, dentistry, optometry, architecture, engineering, teaching, and accounting) and to "learned or artistic professionals" who "customarily and regularly exercise discretion and independent judgment in the performance of his or her duties." Such employees must also earn at least two times the minimum wage for full-time employment.

In two recent decisions, one state and one federal, the courts have wrestled with defining who is and is not covered by the professional exemption. In the first case, Campbell v. PricewaterhouseCoopers, approximately 2,000 current and former junior accountants at PricewaterhouseCoopers ("PwC"), brought claims for unpaid overtime. California law requires overtime pay if an employee works more than eight hours in a day and/or 40 hours in a week unless the employee is exempt. Requiring long hours from accountants who have not yet passed the CPA exam is, of course, common practice in the accounting industry, especially among the big four accounting firms. Plaintiffs argued that since such individuals are not yet certified by the state, they do not qualify under the professional exemption. PwC, however, contended that even though these individuals did not yet have CPA status, they were, in fact, "learned professionals" to whom the exemption applied.

The Ninth Circuit took a middle-ground approach and ruled that whether or not such individuals come within the ambit of the professional exemption is a question of fact. In other words, the PwC junior accountants were not automatically in or out of the professional exemption, but rather, PwC could present evidence at trial to try to meet its burden of justifying the exemption. The court applied a similar analysis to the question of whether these individuals were covered by the administrative exemption. Thus, while neither side got everything it wanted, as a practical matter, it is now very difficult to maintain a large wage claim class action lawsuit on behalf of a group that arguably would fall within the "professional" definition for purposes of California law.

The PwC decision was followed by a recent California Court of Appeal decision, Zelasko-Barret v. Brayton-Purcell, LLP. In this case, a law clerk awaiting bar results claimed that the law firm failed to pay him overtime wages and other employee benefits under California law. He alleged that the firm incorrectly classified him as an exempt employee under the "learned professional" classification, even though he was not yet a lawyer. On a summary judgment motion, the trial court found that the firm's undisputed evidence established that plaintiff performed duties that qualified him as a "learned professional." The appellate court agreed. In reaching its decision, the court focused on the clerk's duties, which included drafting pleadings and discovery, independently evaluating and responding to legal arguments raised by opposing counsel, conducting legal research, speaking with opposing counsel, clients, and witnesses, etc. These responsibilities required the exercise of discretion and judgment. The court also noted that he held an advanced degree and was treated like any other junior attorney. As such, his claim for additional wages and benefits was rejected.

In both of these cases, the courts looked at the nature of the employees' work and specific duties in determining whether the professional exemption applied. In addition to the discretion/independent judgment and salary requirements, the position must require knowledge of an advanced type in a field and not consist of routine mental, manual, mechanical, or physical work. These cases demonstrate that classifying an employee who does not clearly meet one of the designated professional categories as exempt could be a risky proposition.

Laurie E. SherwoodIf you have questions about this article, feel free to contact the author, Laurie E. Sherwood, at This email address is being protected from spambots. You need JavaScript enabled to view it.  - or any WFBM attorney with whom you are working.