The U.S. Court of Appeals for the 2nd Circuit recently held that entry-level accountants are exempt from the overtime requirements of the Fair Labor Standards Act (FLSA) as learned professionals. Pippins v. KPMG LLP (decided July 22, 2014).

To be an exempt learned professional, an employee must have as his primary duty “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 work must be predominantly intellectual in character and require the consistent exercise of discretion and judgment in a field of science or learning in which specialized academic training is a standard prerequisite for entrance into the profession.

The accountants who filed suit contended that audit associates receive all the training necessary to perform their function after their arrival at KPMG rather than through a prior course of intellectual instruction. They also contended that audit associates do not exercise specialized knowledge or professional discretion in performing their duties because they primarily perform routine low-level work.

This is the first case in which the 2nd Circuit has interpreted the prong of the professional exemption that requires “advanced knowledge.” The court held that “discretion and judgment” in the context of the professional exemption should not be interpreted in the same way as the parallel requirement of “discretion and independent judgment” in the administrative exemption. According to the court:

In the context of administrative work, the standard serves to identify, from among the many workers whose jobs could generally be characterized as “administrative,” those who perform duties primarily directed towards “management or general business operations.” Learned professionals, however, particularly those working for firms that provide professional services to other businesses, need not exercise management authority to operate as professionals; what matters is whether they exercise intellectual judgment within the domain of their particular expertise.

The undisputed facts demonstrated that audit associates practice professional skepticism in the sense of the “judgment” characteristic of accountants; the fact that they are required to bring errors to the attention of more senior team members did not undermine a finding that they exercise discretion and judgment.