Minimum Wage Compliance Measured by Workweek, Not by Hour, 9th Circuit Rules

Author: Michael Cardman, XpertHR Legal Editor

December 1, 2017

Wages may be averaged out over a workweek, instead of calculated by the hour, to determine whether an employer has complied with minimum wage law, the 9th Circuit Court of Appeals has ruled.

In other words, if an employer pays its employees a wage less than the minimum wage for certain hours but more than the minimum wage for other hours, and the total wages paid during any given workweek divided by the total number of hours worked averages out to be the minimum wage or higher, then the employer will have complied with the Fair Labor Standards Act (FLSA), the 9th Circuit ruled in Douglas v. Xerox Business Services.

With its ruling, the 9th Circuit - which covers Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington - joined the D.C. Circuit and the 2nd, 4th and 8th Circuits - which collectively cover Arkansas, Connecticut, the District of Columbia, Iowa, Maryland, Minnesota, Missouri, Nebraska, New York, North Carolina, North Dakota, South Carolina, South Dakota, Vermont, Virginia and West Virginia - in adopting this interpretation. It also is the enforcement policy of the US Department of Labor (DOL).

The 9th Circuit identified only two other district courts (besides the lower court from which the Douglas plaintiffs appealed) that have rejected the per-workweek measure: Rhode Island's, which adopted a contract-based approach, and Massachusetts', which adopted a per-hour approach.

The employees in the Douglas case - customer service representatives at call centers run by Xerox Business Services - earned different rates depending on the task they performed and the time spent on that task. For some activities, such as training and meetings, they received a flat rate; for others, they received a variable rate based on factors like customer satisfaction and the length of calls. At the end of a workweek, Xerox added up their total wages and divided them by the number of hours worked that week. If the resulting hourly wage was less than the minimum wage, Xerox gave them a subsidy to bump the average hourly wage up to the minimum wage.

The employees had claimed that the FLSA measures compliance on an hour-by-hour basis and does not allow averaging over a longer period. But the 9th Circuit rejected this argument. Because "little can be gleaned" from the original text of the law - which states only that "[e]very employer shall pay to each of his employees who in any workweek is engaged in commerce … not less than … $7.25 an hour" - the 9th Circuit followed the reasoning of the other circuits and ruled in favor of a per-workweek interpretation.