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Entry-Level Accountants Ineligible for Overtime Pay

In a recent decision, the United States Court of Appeals for the Second Circuit ruled that entry-level accountants were "learned professionals" and therefore exempt from the overtime provisions of the Fair Labor Standards Acts.

The issue for the court was whether junior employees at KPMG met the criteria for being exempt from the FLSA's overtime requirements under the "learned professional exemption" based on the following facts:

  • they received substantial specialized education as accountants
  • they were designated as accountants by their employer
  • they performed entry-level accounting tasks
  • they were automatically promoted to a more senior accounting position after two years of satisfactory employment

Generally speaking, the professional exemption applies where "an employee's primary duty must be the performance of work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction." The court found that merely because the junior accountants were subject to supervision by more experienced colleagues and were required to comply with certain "formal guidelines" did not relegate them to the role of "non-professional staff." The court emphasized that although the associates' "tasks can be broken down into component parts, and that the junior accountants are provided with step-by-step instructions for performing their functions effectively does not mean that in performing these tasks audit associates do not demonstrate the professional skepticism and trained intellect that is required of professional accountants."

The court also rejected the associates' argument that however well-educated they are, "their actual work does not call on whatever advanced knowledge they have acquired in their course of study, but only on KPMG's own materials and internal training." The court noted "that the average classics or bio-chemistry major could not understand [KPMG's training] materials, or develop the requisite understanding of the audit function, on the basis of a brief training period."