Lawyer Henry Juroviesky says he may sue more accounting firms for what he sees as overtime abuse.

The lawyer who launched a class action suit against KPMG LLP over allegations it didn’t compensate employees fairly for working overtime may just be warming up.

Henry Juroviesky, managing partner of the Toronto-based Juroviesky and Ricci LLP, says the lawsuit he filed earlier this month in the Ontario Superior Court of Justice, which seeks at least $20 million in punitive damages from the accounting giant, has created “an uproar” in the industry.

He says the practice of requiring employees to work unpaid overtime is “extremely pervasive” among all the major players.

“They all work the same way. We may be launching the same type of suit against all the big accounting firms in Canada. People at the other firms are running around scared that I’m going to sue them next,” he says.

“I only asked for $20 million but this is a little more pervasive than I thought so it may be $65 million to $100 million.”

He estimates the lawsuit could encompass between 15 and 20 per cent of KPMG’s workforce, including all employees who are not chartered accountants, such as Canadian and American lawyers and “tax technicians.”

“As long as you’re not a chartered accountant, you should be getting paid for your overtime. You’re really working as a consultant,” he says.

According to the statement of claim, employees were given instructions from their managers that they were to charge more hours per week than they were permitted to work under applicable provincial legislation.

“Accordingly, when management at KPMG told employees to charge 50 and 60 hours per week, management was aware that such employees would be required to work between 65 and 90 hours to complete such charge requirements,” the suit says.

The suit further alleges KPMG has an “unwritten policy” that employees must only record hours worked that can be recovered under budget for a client.

“If an employee was to work more hours on a project than management could recover, the employee would receive a poor performance review based on ‘low recovery percentage.’ Accordingly, employees would ‘eat their time’ so as not to receive poor performance evaluations,” the suit says.

Shilpa Kotecha, media relations manager at KPMG, says the company only recently received the lawsuit and will be reviewing it in detail with its lawyers before making any further response. The firm did, however, release the following statement:

“At KPMG we highly value our relationship with our employees. KPMG provides a competitive compensation and benefits package in keeping with its goal of being an employer of choice. Our comprehensive compensation practices include overtime policies which comply with applicable legislative requirements.”

Juroviesky says the employment standards of Ontario provide exemptions to overtime rules, the most prominent of which is chartered accountants working for chartered accounting firms.

The same does not apply to lawyers in this case, he contends. “Canadian lawyers acting as lawyers don’t have to get paid overtime but if a lawyer is a consultant for an accounting firm, they are due overtime, we argue,” he says.

“The accounting firms are finding themselves in a bit of a pickle. They cannot say they are practising law because they are not law firms. It’s illegal for a lawyer practising law to take orders from a non-lawyer.”

Juroviesky says the suit was launched after he was approached by Alison Corless, a former KPMG employee who worked at the company from 2000 to 2004. According to the lawsuit, she was hired as an assistant to a specialist and her work was to be mainly data entry. Her starting salary as a “technician” was $30,000 but she was earning $56,000 at the end of her tenure, even though she had never been promoted.

During the firm’s busy season, she was sometimes required to stay until midnight to finish her work, making for 16-hour days, the statement of claim says. When she approached the company about being paid for her overtime, she was told it was already included in her salary. When she left the company, she estimated she was owed $87,000 in overtime.

“She’s gutsy and she stepped up to the plate,” Juroviesky says.

John Godard, a professor at the I.H. Asper School of Business at the University of Manitoba, says accounting firms used to be legendary for having their people work many hours at low pay at different times of the year. The situation was exacerbated during the 1990s when unemployment was high, rhetoric about globalization had people fearful of losing their jobs and employers took advantage, Godard says.

“I sense a change in attitude. There’s a bit of a backlash now. Any sense of commitment is starting to fall by the wayside. People are looking in the mirror and saying, ‘I need to have a life here and these people aren’t letting me have it,’” he says. “It’s not, ‘let’s all go on strike,’ it’s more an individualistic response of not caring that much anymore and not being committed. People burn out.”

Godard says the lawsuit could very well impact KPMG’s recruiting ability in the future. “My perception is they’ve been having trouble recruiting in recent years. It may be people perceive accounting as a difficult occupation and are less interested in it. If I was a student and had an offer from more than one firm, I’d probably want to take the offer from the firm that didn’t have a bad reputation,” he says.

Certified management accountant Harry Black, the managing partner of Winnipeg-based F.H. Black & Co., says the general employment situation was “abusive” years ago with the shortage of jobs and the excess supply of candidates for accounting positions.

“The protocol was, ‘maximize the hours on these people, they’re locked in. They’re all at the mercy (of the firm) in terms of the hours (management) wants them to work.’ It’s an industry issue and it finally caught up with some of the bigger players,” he says.

Black says it’s not the employee’s fault if the firm can’t bill out for a certain amount of overtime. He says it’s likely the fallout from the KPMG situation will force accounting firms to reassess how they compensate their people. He says there may be some catching up that firms have to deal with, such as doling out vacation days or some other type of compensation, for past overtime. He says it’s likely overtime hours will have to be approved in the future.

“Employees making that call themselves, knowing they’ll be earning overtime, is akin to increasing your own remuneration without any approval. The whole overtime situation will probably be tightened up,” he says.

The net result to accounting firms will be higher labour costs and possibly reduced margins if they’re not able to pass the added expense on to clients, he says. “They may have to refine the client estimating process. They’ll have to factor in the overtime factor, which was never there before.”

Derrick Coupland, a partner in Blacksheep Strategy, a Winnipeg-based branding consulting company, says the lawsuit has the potential to damage KPMG’s brand in a couple of ways. First, if its clients perceive a decline in service, morale or commitment from KPMG employees and second, if the company has a problem with employee retention and recruitment in the future.

But Coupland says the most likely scenario is that the lawsuit won’t have much of an effect.

“Labour issues surface routinely across all types of companies. The nature of labour issues is they don’t stay newsworthy. They get covered and go away. I don’t think it will have the legs and be newsworthy for very long,” he says.

“If you think about KPMG’s clients, I suspect businesses tend to be non-judgmental or sympathetic to other business’s labour issues.”