Court OKs 'mind-numbingly complex' pay averaging plan
- The Fair Labor Standards Act's (FLSA) minimum wage requirements can be met by looking at an employee's entire workweek rather than each individual hour worked, the 9th U.S. Circuit Court of Appeals has ruled (Douglas v. Xerox Business Services, No. 16-35425 (Nov. 15, 2017)).
- The case involved Xerox customer service representatives who received different pay rates for different tasks — a setup that the court called "mind-numbingly complex." For example, workers were paid $9.04 per hour for tasks like meetings and trainings. For time spent managing inbound calls, pay was calculated based on a matrix of qualitative controls (like customer satisfaction) and efficiency controls (such as length of calls). The wage ranges from $0.15 to $0.25 per minute.
- If their overall rate fell below minimum wage, the company paid employees a subsidy so that their total pay, when divided by hours worked, would meet the minimum wage. The reps sued, alleging that Xerox's pay practice violated the FLSA’s requirements because there were some hours for which they weren't paid minimum wage. The court, however, disagreed.
As the Douglas court noted, other appeals courts and the U.S. Department of Labor (DOL) have approved such averaging, too.
The 9th Circuit noted that shortly after the FLSA took effect, DOL made clear 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 also acknowledging that the statute could be read to support a per-hour measure.
Employers must determine what will serve as their definition of "workweek," but once defined, appear free (at least in the circuits that have addressed the issue and where no state or local laws apply) to merely ensure that workers' pay at least averages to the applicable minimum wage.
- U.S. Court of Appeals for the Ninth Circuit Douglas vs. Xerox Business Services