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In determining whether it is in compliance with the minimum wage requirement under the Fair Labor Standards Act (FLSA), an employer may use all hours worked in a workweek for its calculation, according to the 9th U.S. Circuit Court of Appeals.
Kristy Douglas and Tysheka Richard worked as customer service representatives at call centers run by Xerox. They were paid different rates for different tasks, and some tasks performed were not assigned any rate of pay.
At the end of each workweek, Xerox totaled the hours worked and divided that amount by the amount of pay earned for those hours. If the resulting hourly wage was equal to or exceeded minimum wage, the employees were not paid anything more. If the resulting hourly wage was less than minimum wage, the employees were given subsidy pay to bump their average hourly wage up to the minimum wage.
[SHRM members-only how-to guide: How to Calculate Overtime Rates for Shift Differentials]
Douglas and Richard filed a lawsuit claiming, in part, that Xerox's payment method violated the FLSA's minimum wage requirement. The employees argued that Xerox should not be permitted to average their wages over the workweek and should instead make an hour-by-hour determination of minimum wage compliance. They contended that by using the workweek method of calculation, Xerox was not paying minimum wage for every hour they worked.
The trial court disagreed with the employees, and the 9th Circuit affirmed the trial court's ruling. An employer is permitted to measure minimum wage compliance by the workweek, the appeals court concluded.
The FLSA's minimum wage requirement does not set forth a specific computation period or say that the only permissible measure is the hour, the appeals court explained. Instead, the law simply states 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 use of the term "workweek" certainly signals that the proper measure could be something other than an hour, the court reasoned.
The appeals court determined that because the language of the FLSA did not conclusively resolve the question, it could rely on the U.S. Department of Labor's (DOL's) interpretation of the law. The DOL, which is charged with administering the FLSA, has long applied a per-workweek measure for minimum wage calculations. Over the years, courts have "overwhelmingly followed the agency's guidance," such that the 2nd, 4th, 8th and D.C. circuits have all "embraced the per-workweek construction."
Favoring consistency for employers operating in multiple jurisdictions and noting that Congress has done nothing to indicate disapproval of the DOL's interpretation, the 9th Circuit concluded that it would "preserve, not upset, the entrenched per-workweek measure" for the minimum wage provision of the FLSA.
Douglas v. Xerox Business Services, LLC, 9th Cir., No. 16-35425 (Nov. 15, 2017).
Professional Pointer: This case provides refreshing clarity and uniformity for employers on an issue of federal law. When calculating minimum wage for purposes of federal law, employers can confidently use a per-workweek measure instead of a per-hour measure for all employees. As each state usually has its own minimum wage law, however, employers should check to determine that such a calculation does not conflict with the relevant state's minimum wage requirements.
Jody M. Florence is an attorney with Kamer Zucker Abbott, the Worklaw® Network member firm in Las Vegas.
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