Pippins v. KPMG LLP
759 F.3d 235
| 2d Cir. | 2014Background
- Plaintiffs (Audit Associates at KPMG) sued for unpaid overtime, alleging they regularly worked >40 hours but were not paid overtime under the FLSA. District Court granted summary judgment for KPMG; plaintiffs appealed.
- Audit Associates are entry-level accountants who perform inventory observations, walkthroughs, and prepare work papers; they are typically promoted to Senior Associate after ~2 years.
- Parties agreed on the tasks performed and typical supervision structure: junior associates follow templates/guidance and their work is reviewed by seniors; sometimes a first-year associate is the only team member on simpler engagements.
- KPMG required (or hired mostly) candidates with accounting degrees or CPA eligibility; most associates had accounting or related degrees.
- Central legal question: whether Audit Associates qualify for the FLSA learned professional exemption (29 C.F.R. § 541.301) — i.e., (1) work predominantly intellectual requiring advanced knowledge and consistent exercise of discretion and judgment, and (2) that knowledge is customarily acquired by a prolonged course of specialized instruction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Audit Associates perform work requiring "advanced knowledge" and "consistent exercise of discretion and judgment" | Tasks are routine, highly guided by templates/SOPs, and closely supervised; thus no professional discretion | Even junior associates deploy professional skepticism and accounting judgment when testing controls, observing inventories, and preparing work papers; templates and review do not eliminate professional judgment | Held: Yes — their duties require advanced knowledge and exercise of professional judgment characteristic of accountants; exemption applies |
| Whether the work is in a "field of science or learning" (accounting) | Not disputed (plaintiffs conceded accounting is the field) | Accounting is explicitly listed in regs and Audit Associates perform core accounting/audit tasks | Held: Satisfied — accounting is a covered field and Audit Associates perform core accountancy work |
| Whether the advanced knowledge must be "customarily acquired by a prolonged course of specialized instruction" | KPMG training/on‑the‑job instruction supplies necessary skills; prior specialized education not required for tasks | Majority of hires have accounting degrees/CPA eligibility; the profession customarily requires prolonged specialized instruction | Held: Yes — Audit Associates in the vast majority have the requisite prolonged specialized instruction (e.g., accounting degrees/CPA eligibility) |
| Whether summary judgment was premature because discovery was incomplete | Additional discovery could reveal factual disputes about duties, supervision, or training | District court limited discovery to the threshold exemption issue with plaintiffs' agreement; record was sufficient | Held: District court did not abuse discretion; summary judgment appropriate |
Key Cases Cited
- Bilyou v. Dutchess Beer Distribs., Inc., 300 F.3d 217 (2d Cir. 2002) (FLSA exemptions construed narrowly)
- Arnold v. Ben Kanowsky, Inc., 361 U.S. 388 (U.S. 1960) (exemptions narrowly construed)
- Ramos v. Baldor Specialty Foods, Inc., 687 F.3d 554 (2d Cir. 2012) (exemption inquiry: how time spent is factual; applicability is legal)
- Icicle Seafoods, Inc. v. Worthington, 475 U.S. 709 (U.S. 1986) (distinguishing factual vs. legal aspects of exemptions)
- Piscione v. Ernst & Young, L.L.P., 171 F.3d 527 (2d Cir. 1999) (professional exemption analysis and role of discretion)
- De Jesús-Rentas v. Baxter Pharm. Servs. Corp., 400 F.3d 72 (1st Cir. 2005) (professionals may be exempt even when following SOPs if they interpret data and can depart when necessary)
- Rutlin v. Prime Succession, Inc., 220 F.3d 737 (6th Cir. 2000) (learned professional exemption applies where duties reflect professional decision-making)
- In re Novartis Wage & Hour Litigation, 611 F.3d 141 (2d Cir. 2010) (discussing "discretion and independent judgment" in administrative exemption)
- Freeman v. Nat’l Broad. Co., Inc., 80 F.3d 78 (2d Cir. 1996) (interpretive guidance on FLSA policy and exemptions)
- Young v. Cooper Cameron Corp., 586 F.3d 201 (2d Cir. 2009) (importance of the term "customarily" in education prong)