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 1940—less than a year and a half after the FLSA became law—the 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 position has never been codified in the FLSA regulations, neither party to the Xerox litigation could identify any occasion on which the DOL has deviated from its 1940 position.  Indeed, the agency’s Field Operations Handbook and online guidance continue to confirm that the per-workweek measure of compliance is still a proper pay practice.

Courts throughout the country, including the Second, Fourth, Eighth, and D.C. Circuits, have followed the DOL position on the issue.  The Ninth Circuit also noted as significant that Congress has made changes to the FLSA’s minimum wage provision over the years without disturbing the agency and judicial decisions endorsing a per-workweek measure of compliance.  Favoring “national uniformity” on the issue, the Ninth Circuit joined its sister circuits in declaring the workweek as the proper unit for measuring federal minimum wage compliance.

The ability to average pay across the workweek for minimum wage purposes is particularly useful for employers who pay on a commission or piece rate basis, where employees may—depending on their activities—earn less than the minimum wage for certain hours and more than the minimum wage for other hours.

Remember that federal wage law creates a floor of protections, and not a ceiling.  States may still prohibit “pay averaging” in certain circumstances (e.g., when an employee is paid only on a piece rate basis and receives no additional pay for “non-productive” hours), so employers must be mindful of both state and federal law when they assess their pay practices.

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Photo of Allan Bloom Allan Bloom

Allan Bloom is the co-chair of Proskauer’s Labor & Employment Law Department and a nationally recognized litigator and advisor who represents employers, business owners, and management in a broad range of employment and labor law matters. As a litigator, Allan has successfully defended…

Allan Bloom is the co-chair of Proskauer’s Labor & Employment Law Department and a nationally recognized litigator and advisor who represents employers, business owners, and management in a broad range of employment and labor law matters. As a litigator, Allan has successfully defended many of the world’s leading companies against claims for unpaid wages, employment discrimination, breach of contract and wrongful discharge, both at the trial and appellate court levels as well as in arbitration, before government agencies, and in private negotiations. He has secured complete defense verdicts for clients in front of juries, as well as injunctions to protect clients’ confidential information and assets.

As the leader of Proskauer’s Wage and Hour Practice Group, Allan has been a strategic partner to a number of Fortune 500 companies to help them avoid, minimize and manage exposure to wage and hour-related risk. Allan’s views on wage and hour issues have been featured in The New York Times, Reuters, Bloomberg and Fortune, among other leading publications. His class-action defense work for clients has saved billions of dollars in potential damages.

Allan is regularly called on to advise operating companies, management companies, fund sponsors, boards of directors and senior leadership on highly sensitive matters including executive and key person transitions, internal investigations and strategic workforce planning. He has particular expertise in the financial services industry, where he has litigated, arbitrated, and mediated disputes for more than 20 years.

A prolific author and speaker, Allan was the Editor of the New York State Bar Association’s Labor and Employment Law Journal from 2012 to 2017. He has served as an author, editor and contributor to a number of leading treatises in the field of employment law, including ADR in Employment Law (ABA/Bloomberg BNA), Employment Discrimination Law (ABA/Bloomberg BNA), Cutting Edge Advances in Resolving Workplace Disputes (Cornell University/CPR), The Employment Law Review (Law Business Research, U.S. Chapter Author), and The Complete Compliance and Ethics Manual (SCCE).

Allan has served as longtime pro bono counsel to Lincoln Center for the Performing Arts and The Public Theater, among other nonprofit organizations.  He is a past Vice Chair of Repair the World, a nonprofit organization that mobilizes volunteers and their communities to take action to pursue a just world, and a past recipient of the Lawyers Alliance Cornerstone Award for extraordinary contributions through pro bono legal services.

Allan is a Fellow of the College of Labor and Employment Lawyers and has been recognized as a leading practitioner by Chambers since 2011.