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April 30, 2008

North American Big Four firms face lawsuits over unpaid overtime

By Nicholas Moody

Non-professional staff in the US and Canada are challenging Big Four firms for unpaid overtime in several lawsuits totalling more than $100 million. The class actions have been launched in the US states of California and Washington and in the Canadian province of Ontario to recover overtime pay for non-qualified staff who claim they are working more hours than legally obligated.

All the Big Four firms in California currently have pending class action suits against them for unpaid overtime, according to a US lawyer involved in the class actions.

Leon Greenberg is representing staff seeking a class action against Ernst &Young (E&Y) in California. He said the claim against E&Y could extend to between 1,000 and 2,000 people who worked for the firm as non-qualified employees over a period of four to five years, and damages could rise to $100 million. Greenberg told IAB “there is an element of exploitation” when non-qualified staff of large accounting firms do not receive overtime payments after they had worked more than 40 hours a week, as is being alleged in the E&Y California case.

An E&Y spokesperson told IAB he was unaware of the California claim and declined to comment.

Staff entitlement Greenberg said that non-qualified staff are entitled to overtime pay in the E&Y case because Californian legislation only exempts employers from paying overtime to professionals who hold a relevant professional qualification, such as the certified public accountant (CPA) qualification, and who spend most of their time performing professional work involving the use of independent judgment and discretion.

Greenberg said the E&Y claims relate to non-CPA employees, including students and recent graduates, who mainly performed support work. “The function these people perform is really a clerical one; they are not the ones signing off on the opinions. Their job is to review the paperwork and go through the numbers and pass it on to their superiors; they are not involved in a professional capacity,” he said.

Greenberg is involved in another pending class action suit against KPMG in Washington state. In both the California and Washington state cases, class action status is being claimed but has not been approved by the relevant courts.

KPMG Canada is facing a similar class action lawsuit filed by former employee Alison Corless in the Superior Court of Ontario in August last year. She is claiming damages worth C$20 million ($20 million). Corless, then a technician, alleged that KPMG owed compensation to non-qualified staff who worked more than 48 hours a week. The statement of claim made by Corless said line employees were pressured to “eat time”, or not record overtime, to satisfy their immediate supervisors. In Ontario, employees are eligible for overtime pay or time-in-lieu if they work more than 48 hours a week except certified general accountants (CGA), chartered accountants (CA), management accountants (CMA) and students obtaining the work experience required to practise as CGA, CA or CMA.

Redress plan The Ontario class action has prompted KPMG Canada to investigate the claims and develop an Overtime Redress Plan, which it announced in February.

The Big Four firm said it intended to ensure all eligible current and former employees are fully compensated according to provincial legislation for all overtime since 1 January 2000. Crawford Class Action Services will administer the plan and KPMG estimates it will cost the firm up to C$10 million. The firm said implementing the plan did not constitute an admission of liability.

Several of the firms IAB approached in the US and Canada either declined to comment about the class action lawsuits or were not able to be reached. Ernst & Young Canada said it was currently reviewing the issues surrounding the KPMG Canada case and would not comment further. A spokesperson from PricewaterhouseCoopers Canada told IAB the firm has been reviewing the appropriateness of its overtime policies.

Nicholas Moody

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