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Auditor Wage & Hour Litigation Against Big Four Accounting Firms

The Big Four accounting firms in the U.S. - KPMG, Deloitte & Touche, PricewaterhouseCoopers (PwC), and Ernst & Young - retain cadres of unlicensed employees who work in high-pressure, entry-level positions variously titled "Associate," "Audit Associate," "Audit Assistant," "Advisory Associate," and "Unlicensed Associate." Their task is to execute transactions that are essentially rote and clerical.  Yet the Big Four routinely classify these employees as "professional" or "administrative" to exempt them from overtime requirements under federal (Fair Labor Standards Act, or FLSA) and state law.

There are suits pending against each of the Big Four firms, and in several of which Outten & Golden appears as counsel. More details about our present case against Deloitte may be found at http://www.deloitteovertimelawsuit.com/ . After the jump, you can read a survey of the current cases.

KPMG - Two collective actions (the FLSA equivalent of a "class action") are based out of the U.S. District Court for the Southern District of New York, Pippins v. KPMG, LLP, No. 11-cv-01622-CM (Colleen McMahon, J. and James L. Cott, Mag. J.) and Trawinski v. KPMG LLP, No. 11-cv-02978-PAC (Paul A. Crotty, J., and Henry B. Pitman, Mag. J.) (Outten & Golden is counsel in both cases).

The plaintiffs in Pippins seek to certify a class and collective action consisting of Audit Associates and Audit Associate Seconds who worked in the KPMG Audit practice group (First Amended Complaint in Pippins). A motion for conditional certification of the FLSA claim is pending. The case garnered publicity because of entry a protective order entered by the magistrate judge on October 7, 2011, requiring KPMG for the present time to preserve several thousand hard drives from laptop computers used by departed Audit Associates. That order is presently on appeal to Judge McMahon. Judge McMahon on March 21, 2011 also denied a motion to transfer this case to the consolidated case in Central District of California (see below). Trawinski likewise alleges claims on behalf of Advisory Associates under the FLS and New York law. The complaint in that case was filed May 3, 2011 (see Trawinski complaint here).

In the U.S. District Court for the Central District of California, There is also pending In re KPMG Wage & Hour Litigation, No. 07-04396-RSWL-CW (Ronald S.W. Lew, J.), which consolidates suits concerning whether unlicensed accountants were legally precluded from qualifying for the professional exemption or the administrative exemption  under California wage and hour law. On June 15, 2011, the Ninth Circuit reversed summary judgment (642 F.3d 820 (9th Cir. 2011)) and held that There were disputed factual issues on this question. Motions for class certification is scheduled to be briefed in 2012. (See status report.)

In Washington state court, There is another proceeding, Litchfield v. KPMG LLP, No. 07-2-11179-4 SEA (Wash. Super. Ct., Steven Gonzalez, J.), involving Audit Associates employed in that state. On November 24, 2009, the trial judge certified a class of unlicensed (non-CPA) Audit Associates employed during or after 2007. On April 22, 2010, the same judge granted partial summary judgment in favor of the plaintiff class in part, holding that Audit Associates are not exempt as "professional" employees because they fall short of the requisite educational background necessary to perform audit work (Litchfield summary judgment order). There is presently pending an interlocutory appeal in the Court of Appeals of Washington (Litchfield v. KPMG LLP, No. 65372-5-1).

DELOITTE & TOUCHE LLP: In Gersten v. Deloitte & Touche LLP, No.11-cv-4554-RMB-THK and James v. Deloitte & Touche LLP, No. 11-cv-02461-RMB-THK (Richard M. Berman, J., and Theodore H. Katz, Mag. J.) - now consolidated as In re Deloitte & Touche Overtime Litigation - plaintiffs brought suit under the FLS and New York state law, on behalf of current and former Audit Assistants, Audit Senior Assistants, Audit In-Charges and Audit Seniors, from April 11, 2008 (under federal law) and from April 11, 2005 (for New York employees covered by New York law). (Outten & Golden is co-lead counsel in this case.) In an order dated December 16, 2011, the judge granted conditional certification of the FLSA claim and ordered that notice be sent to prospective plaintiffs.

In the U.S. District Court for the NorThern District of California, There is Brady v. Deloitte & Touche LLP, No. C-08 00177 (SI) (Susan Illston, J.), which represents a class of "Audit line of service" (Audit Senior, Audit Manager, Audit Senior Manager and Audit Director) who were not licensed accountants in California, proceeding under California law. These workers are alleged to perform the audit plan for D&T's customers. Performing the audit plan means testing financial statements of clients by obtaining and reviewing underlying documentation, a job that requires only some training and no specialized licensing. A class of these employees was certified on March 23, 2010.

PRICEWATERHOUSE COOPERS - There are several cases proceeding against PriceWaterhouse Coopers ("PwC") in the U.S. District Court for the Eastern District of California before Judge Lawarence K. Karlton: Campbell v. PwC, No. Civ. S-06-2376 LKK/GGH; Kress v. PwC, No. Civ. S-08-965 LKK/GGH; and Le v. PwCP, S-08-997 LKK/EFB (Lawarence Karlton, J.).

The court granted class certification in Campbell on March 25, 2008 of individuals who worked as unlicensed associates in PwC's Attest division at any time from October 27, 2002 to the present and were classified as exempt employees. A motion to consolidate Campbell with Kress and Le (and to dismiss Kress) was denied on August 14, 2008 (see Campbell order  here).

The proposed Le class is broader than the class in Campbell, because in addition to seeking certification of a class of unlicensed California associates under California law, Le also seeks certification of a nationwide class of unlicensed associates under the FLSA.

In Kress, plaintiffs on November 1, 2011 moved for a class action including claims under California wage and hour law for "Senior Associates in the Assurance line of service at any point from October 27, 2003 through the time this action is certified as a class action ('Class Period'), who were not Certified Public Accountants ('CPAs') and who engaged in providing audit services to PwC's clients." (See the Kress class certification  motion.)

There is also pending, in the U.S. District Court for the Southern District of New York, Commission v. PwC, No. 11-cv-5713 (Naomi Reice Buchwald, J.) seeking class relief for Associates in the Assurance line of service under New York law. (Outten & Golden is counsel in this case.) The complaint was filed August 16, 2011 (see Commission complaint here).

ERNST & YOUNG: A suit is pending against E&Y in the U.S. District Court for the NorThern District of California, Ho v. Ernst & Young, 5:05-cv-04867-JF (Ronald M. Whyte, J.), based on California's wage law. (This case was consolidated with two There cases in the same district, Landon v. Ernst & Young LLP and Richards v. Ernst & Young LLP). This suit originally involved the category of assistant certified public accountants who were not licensed CPAs and classified as Staff I or II, or Senior I or II, in the Assurance or Tax groups (or classified as Finance Management Associates, or FMAs), employed in California on or after September 15, 2001 (for FMAs, on or after June 19, 2004). In 2008, Ho was dismissed. Two of the remaining plaintiffs subsequently withdrew from the case, leaving only one putative class representative, Sarah Fernandez, who was employed as a Staff 1 and 2 in E&Y' s Assurance and Advisory Business Services group. On September 20, 2011, the judge granted class certification of the employees of the Tax group, and denied a motion for dismissal or a stay in order to compel arbitration; a petition for interlocutory appeal of this order was denied on December 8, 2011 by the U.S. Court of Appeals for the Ninth Circuit. The class is presently moving to intervene new class representatives for the groups that were not previously certified. (See class certification order  here.)

AnThere case filed in the U.S. District Court for the Southern District of New York, Suthereland v. Ernst & Young LLP, 1:10-cv-03332-KMW -MHD (Kimba M. Wood, J., and Michael H. Dolinger, Mag. J.), proceeding under the FLS and New York law. This case seeks to certify "junior audit staff employees" specifically, those E&Y employees in their first two years of employment, who are ranked as either Staff I or II, and who are employed in performing audits but have not been licensed as certified public accountants. The magistrate judge issued a report and recommendation on April 25, 2011 that the case not be transferred to California to be consolidated with the pending Ho case. Judge Wood overruled objections and adopted the report and recommendation on May 23, 2011. (See the magistrate judge's report and recommendation (R+R) denying transfer  and the order adopting R+R here.)

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