• Class Certification on Overtime Claim Denied to Accountants Subject to California Administrative Exemption
  • July 26, 2011 | Author: Mark S. Askanas
  • Law Firm: Jackson Lewis LLP - San Francisco Office
  • Affirming the denial of class certification in an action for unpaid overtime brought by former accounting associates, the California Court of Appeal has held that the plaintiffs failed to demonstrate a predominance of common questions of law or fact.  Soderstedt v. CBIZ Southern California, LLC, No. B224349 (Cal. Ct. App. July 7, 2011).  The Court found that applying the administrative exemption (set forth in Wage Order 4-2001) in a blanket manner to the accountants “defeated any finding of predominance of common issues” because of the individualized inquiries needed to determine whether the exemption applied.

    The Facts
    CBIZ Southern California, LLC is an accounting and financial services firm.  Accountants at CBIZ are required to hold an accounting degree and are employed at different levels, from Lead Managing Director to Associate.  Roger William Soderstedt, Jr. began working at CBIZ as an associate in September 2005, following his graduation from college.  In January 2007, he was promoted to senior associate; he left CBIZ in June 2007 after he received his certified public accountant license.  Ruslan Daych began work as an associate for CBIZ in July 2006.  Daych was not promoted to senior associate and was terminated in August 2008.  CBIZ’s associates were expected and encouraged to work long hours, including more than eight hours per day and 40 hours per week.

    The Suit
    Soderstedt and Daych (collectively, the “plaintiffs”) filed a class action complaint against CBIZ in July 2009, alleging, among other things, that CBIZ failed to pay them overtime in violation of the California Labor Code.  The plaintiffs purported to represent at least 146 similarly situated current and former CBIZ associates and senior associates (collectively, “junior accountants”) and moved for class certification.  In support of their motion, the plaintiffs submitted declarations describing their responsibilities and alleged that junior accountants’ primary duty was to prepare tax returns using standardized computer software.  Junior accountants were expected to seek guidance from a more senior accountant if they were uncertain about any issue on a tax return.  CBIZ opposed the plaintiffs’ motion and presented evidence showing that junior accountants had widely varying responsibilities within different offices, depending on their experience, and had different tasks, levels of supervision, and clients.

    The trial court denied the plaintiffs’ motion, ruling that common issues of fact did not predominate.  The plaintiffs appealed.

    Class Certification Requires Predominance of Common Question
    For class certification to be granted, a plaintiff must demonstrate that common questions of law and fact predominate over individualized questions.  To determine whether common questions of fact predominate, the trial court must examine the issues framed by the pleadings and any affirmative defenses.

    Here, the plaintiffs alleged that they were non-exempt employees and CBIZ failed to pay them overtime.  CBIZ maintained that the plaintiffs were exempt administrative employees.  Although the trial court did not refer specifically to the administrative exemption in its written order, it focused on it during the class certification hearing.

    The trial court observed that a class action was not appropriate because “multiple, perhaps as many as 146 mini trials” were required to determine whether the exemption applied.

    Agreeing with the trial court, the Court of Appeal found that “the applicability of the administrative exemption would require individualized inquiries to determine whether its elements were satisfied.”  The evidence showed differences in the work performed by the junior accountants and differences in the levels of discretion and independent judgment that they used based on their experience and assignments.  Similarly, the amount of supervision provided to the junior accountants depended on the individuals involved, their assignments, and their office.  Accordingly, the Court held that common questions did not predominate, and the trial court correctly denied class certification.

    Exemption Arguments Rejected
    The plaintiffs argued that the Court should throw out the trial court’s determination because, as a matter of law, accountants do not qualify for the administrative exemption.  The Court rejected this argument as unsupported by law.

    The plaintiffs also contended that the exemption did not apply because the junior accountants’ work was subject to supervision.  The Court also rejected this argument, noting there was no support for the plaintiffs’ “overly broad claim that mere review and approval of the class members’ work is sufficient to take them outside of the administrative exemption.”  Thus, the Court found that the trial court did not make erroneous legal assumptions in concluding that common issues did not predominate.

    Implications
    This decision is good news for accounting firms in California, since increasingly they appear to be targets of plaintiffs’ lawyers asserting overtime claims.  The Court recognized that a class action was ill-suited for determining whether junior accountants fell within the administrative exemptions.  Accounting firms should take a proactive approach to managing exposure to wage-hour claims and consult with experienced California employment counsel to consider options for minimizing that risk.