Ninth Circuit Joins Others In Endorsing Hourly Pay Averaging Under FLSA

On November 15, 2017, in a case of first impression in the Ninth Circuit, the Court of Appeals adopted the longstanding position of sister circuits and the U.S. Department of Labor that for purposes of determining whether an employee has received the minimum wage under federal law, the employer can divide total weekly earnings by the number of actual hours worked. In other words, the relevant unit for determining minimum-wage compliance is the workweek as a whole—and not individual hours within the workweek.

The plaintiffs in Douglas v. Xerox Business Services, LLC (No. 16-35425) were customer service representatives who were paid different rates depending on the task and the time spent on each task. At the end of each workweek, Xerox added the amounts earned for all tasks and divided the total by the number of hours the employee worked that week. If the resulting hourly rate was below the minimum wage, Xerox provided a supplemental payment to raise the average hourly rate to the minimum wage.

The plaintiffs alleged that pay practice was unlawful, arguing that the FLSA measures minimum wage compliance on an hour-by-hour basis and does not allow averaging over a longer period.

The Court of Appeals disagreed, relying on the longstanding view of both sister circuits and the DOL that minimum wage compliance is to be assessed on a workweek basis. While the text of the FLSA states the minimum wage obligation as an hourly rate, it does not definitively prescribe the computation period or say that the only permissible measure is the hour. Legislative history also does not answer the question directly.

But in February 1940less than a year and a half after the FLSA became lawthe DOL adopted the per-workweek measure of minimum wage compliance. In an opinion letter issued by the General Counsel of its Wage and Hour Division, the agency noted that "[f]or enforcement purposes, the Wage and Hour Division is at present adopting the workweek as the standard period of time over which wages may be averaged to determine whether the employer has paid the equivalent of [the minimum wage]." While the enforcement...