In an issue of first impression, the Ninth Circuit joined the Second, Fourth, Eighth and D.C. Circuits (and the position adopted by the Department of Labor) that, in determining whether an employer has complied with the minimum wage provisions of the Fair Labor Standards Act (“FLSA”), the proper inquiry is whether the total compensation for a given workweek divided by the total hours for that week meets or exceeds the minimum wage. Douglas v. Xerox Business Servs., LLC, 2017 U.S. App. LEXIS 22967 (9th Cir. Nov. 15, 2017). Employers should be aware that this case addresses only federal, and not state, wage and hour law in the Ninth Circuit.

In Douglas, Xerox paid an hourly wage (at or above the minimum wage) for some activities of its call center employees (e.g. training) but for other activities, such as customer service calls, paid a rate that varied depending on both qualitative (e.g. customer satisfaction) and quantitative (e.g. call duration) factors, and could be an hourly rate that fell below the minimum wage for that hour. Each week an employee’s total compensation was determined and then divided by the number of hours worked. If the employee’s per-hour average for the week did not meet or exceed minimum wage, the employee was paid a subsidy that raised his hourly average to the legal minimum. Thus, while all employees were paid at least minimum wage for every hour of the week when calculating the average hourly rate over the course of the week, an employee might receive less than minimum wage for some hours of the week and more than minimum wage for others. The plaintiffs argued that this violated the FLSA because they were not paid at least minimum wage “for all hours worked.” The district court rejected the argument but certified the issue for interlocutory appeal.

Upon examination of the “test, structure and purpose” of the FLSA, the Ninth Circuit concluded that the Act itself does not specify whether the minimum wage calculation must, or even may, be determined on a per-hour, per-week or other basis. Shortly after the FLSA’s implementation nearly 80 years ago, however, the DOL adopted 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. The Court of Appeals noted that since the DOL’s adoption of the workweek-based minimum wage compliance computation, every court of appeals addressing the issue has accepted the DOL’s position as a reasonable and enforceable interpretation of the Act. The Ninth Circuit joined those courts.