The Fair Labor Standards Act requires that employees be paid a minimum wage of $7.25 per hour. In Douglas v. Xerox Business Services, LLC, the plaintiffs challenged Xerox’s variable pay system as violating these requirements. Under the system, employees are paid different rates (all exceeding minimum wage) for various work functions. For other work functions, no corresponding pay is provided. The plaintiffs contended that this plan violates the FLSA because they worked certain hours for no compensation.
Last week, the Ninth Circuit disagreed, affirming summary judgment for the employer. The court accepted Xerox’s argument that compliance with the FLSA’s minimum wage provisions is determined on a weekly rather than an hourly basis. The Xerox pay system averages pay for all hours worked in a week and increases it to minimum wage in any weeks where the average variable compensation fails to meet this level. The Ninth Circuit agreed that the FLSA could be read to require either hourly or weekly compensation. However, since 1938, the Department of Labor has interpreted and enforced the minimum wage provisions on a workweek basis.
The court noted that four other appellate circuits have agreed with DOL’s position, and that this uniformity – along with deference to DOL’s position – led to the conclusion that Xerox’s pay plan complied with the FLSA’s minimum wage requirements. The Ninth Circuit occasionally adopts positions in wage and hour cases that differ from the majority of other federal circuits. This decision avoids such a split among the circuits and further solidifies employers’ ability to assure compliance with minimum wage requirements by averaging total pay divided by the number of hours worked in a given week.