California Overtime Suits Hit Two of Big Four

Lawsuits claiming that white-collar workers in the Golden State are eligible for overtime pay will dog PwC and Deloitte into next year.

As California goes, so goes the country. If that adage is accurate, Big Four accounting firms may be looking at a slew of class-action lawsuits questioning in-house overtime policies for white-collar workers. Two similar lawsuits are wending their way through the U.S. district court system in California, one targeting PricewaterhouseCoopers and the other Deloitte & Touche.

In the PwC case two former accounting employees allege that they were denied overtime pay and other benefits when they worked for the accounting giant. On Wednesday, the plaintiffs petitioned the court for permission to pursue the case as a class-action suit. The year-old case is being heard in California’s Eastern District and seeks to cover all associates and senior associates employed by PwC in California.

PwC spokesman David Nestor, who asserts that the company intends to defend the lawsuit “vigorously,” also notes that “associates and senior associates are appropriately classified as exempt employees under California law and are provided with the beneficial treatment associated with their exempt status.”

Meanwhile, a suit against Deloitte Tax and Deloitte & Touche LLP, which will be a year old in December, has moved from state superior court to federal court in California’s Central District. Also a class-action case, the complaint charges that Deloitte violated state labor law by classifying and treating tax associates and tax seniors employed in California as exempt employees, and therefore ineligible for overtime pay.

Although the discovery phase of the case has not yet been completed, plaintiff’s lawyer Armond Marcarian estimates the class size will rise to more than 1,000 former and current Deloitte employees, representing millions of dollars worth of back pay plus interest and penalty awards. Marcarian told CFO.com that to remove a case to federal court the damages — if liability is eventually established — must exceed $5 million under the Class Action Fairness Act.

A Deloitte spokesman, however, told CFO.com the company “believes the case is without merit and intends to defend it vigorously.” Further, he said Deloitte “is in compliance with applicable laws and that it treats its employees fairly.”

The trial is set for October 2008, said Marcarian, adding he is pleased with the direction in which the case is moving.

California has long been considered an employee-friendly state and, as a result, has been the site of several key overtime suits involving white-collar workers. For example, in May a class-action suit was filed in California against IBM by current and former sales representatives who charge that the company denied them overtime. However, a judge dismissed the suit because the lead plaintiff reportedly signed a severance agreement promising not to take legal action against the company, noted InformationWeek. Last year, however, IBM agreed to pay $65 million to more than 32,000 technology specialists to settle charges that it improperly exempted employees from receiving overtime pay.

Older suits illustrate the state’s relatively long history of legal challenges related to overtime rules. For example, in September 2005, insurer Allstate Corp. announced that it would pay as much as $120 million to settle claims that it refused to pay its California employees for working extra hours during nights and weekends. In February of that same year, CFO.com reported that a spate of similar overtime suits hit Silicon Valley companies, including Electronic Arts, Oracle, IBM, and Pacific Software.

The rise in overtime suits in the Golden State may have been prompted by the passage of California’s 2004 Private Attorneys General Act, which gives employees the right to sue their employers to enforce the state’s labor code. What’s more, that same year federal labor laws were updated to make several new groups of white-collar workers eligible for overtime pay. The Labor Department now estimates that 86 percent of the U.S. work force, or 115 million employees, is eligible to receive overtime pay, according to a report in BusinessWeek.

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