Hill v. Xerox Bus. Servs., LLC , 191 Wash. 2d 751 ( 2018 )

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IN THE SUPREME COURT OF THE STATE OF WASHINGTON
CERTIFICATION FROM THE UNITED No. 94860-7
STATES COURT OF APPEALS FOR THE
NINTH CIRCUIT IN
EN BANC
TIFFANY HILL, individually and on behalf
of all others similarly situated,
Plaintiff-Appellee,
Filed SEP ^ 0 2018
XEROX BUSINESS SERVICES, LLC;
LIVEBRIDGE,INC., an Oregon
Corporation; AFFILIATED COMPUTER
SERVICES INC., a Delaware Corporation;
AFFILIATED COMPUTER SERVICES
LLC,a Delaware Limited Liability
Company,
Defendants-Appellants.
GORDON MeCLOUD, J.—In Washington, hourly workers are entitled to
their contractual hourly rate of pay (or the legal minimum wage) for every hour
worked. Piece rate workers, on the other hand, are entitled to their contractual piece
rate (or the legal minimum wage), but that rate is not necessarily guaranteed for
every hour individually worked: a higher production hour might subsidize a lower
production hour. See Wash. Dep't of Labor & Indus., Emp't Stds. Admin.
No. 94860-7
Policy (DLI Admin. Policy) ES.A.3 (July 15, 2014). That means that the
characterization of a compensation formula as either hourly or piece rate can have a
dramatic effect on the amount of money that a Washington employer must pay its
employees.
The dispute in this case concerns the correct characterization of Xerox's'
payment plan under Washington law. Xerox has designed a compensation formula
for its call center employees based on what Xerox calls a "production minute"—a
unit of time (not a unit of tangible items, like bushels, or shirts, or pounds) during
which a call center employee services incoming calls. Defs.-Appellants' Opening
Br. at 4. If the "production minute" forms the basis for a bona fide piecework
system, then one set of minimum wage rules and regulations apply. But if the
"production minute" instead forms the basis for an hourly payment system, then
another set of hourly and minimum wage protections apply. The characterization of
that compensation formula either as hourly or piecework forms the basis for this
wage dispute brought by call center employee Tiffany Hill against her employer
Xerox, in federal court. Because the answer to this question depends on an
'We refer to defendants Xerox Business Services LLC, Livebridge Inc., Affiliated
Services Inc., and Affiliated Computer Services LLC collectively as "Xerox" throughout
this opinion.
No. 94860-7
underlying issue of Washington state law, the Ninth Circuit has certified the
following question to this court:
[WJhether an employer's payment plan, which includes as a metric an
employee's "production minutes," qualifies as a piecework plan under
Washington Administrative Code[WAC] Section 296-126-021?
Hill V. Xerox Bus. Servs., LLC,868 F.3d 758, 760(9th Cir. 2017).
We accept the Ninth Circuit's question as presented, and we answer it no. An
employer's payment plan that includes as a metric an employee's "production
minutes" does not qualify as a piecework plan under WAC 296-126-021.
1. Facts and Procedural Background
A. Xerox's ABC Compensation Plan
Xerox operates call centers nationwide that answer customer service calls on
behalf of Xerox's third-party clients. Xerox uses different compensation formulas
to pay its employees based in part on how it bills the clients served by each particular
call center. The call center involved in this lawsuit is located in Federal Way. Xerox
compensates Federal Way call center employees using its "Achievement Based
Compensation"(ABC)plan.
The ABC plan provides compensation based on three variables: (1) the
employee's unique ABC rate for the pay period, (2) the employee's "production
minutes" during that pay period (explained in more detail below, but it basically
No. 94860-7
corresponds with the time the employee spends working on inbound customer
calls),^ and(3)the local minimum wage. When this case arose,the ABC rate ranged
from $0.15 to $0.23 per production minute based on each employee's average
customer satisfaction rating and average call handling time.^ Using that rate range,
employees could earn a maximum of $9.00 to $13.80 per hour depending on their
particular ABC rate.
B. The "Production Minute"Basis ofXerox's Compensation Plan
To earn the maximum hourly rate, however, the employees would have to
perform incoming-call-related work every minute they were at the call center. This
is because the ABC rate applies only to "production minutes." Xerox defines this
^ In the past, Xerox paid its employees based on the number of calls they resolved
but switched to a per minute metric after receiving complaints from employees that the per
call metric penalized them for taking difficult calls that took longer to resolve. Defs.-
Appellants' Opening Br. at 3-4.
^ Under the ABC plan, an employee's ABC rate fluctuated each pay period based
on two metrics: average customer service rating and average call handling time:
Average Customer AHT [Avg. Call Handling AHT 485+ [seconds]
Rating Time] 0-485 [seconds]
[TierA:! 100% [$0.23 per min.] [$0.19 per min.]
[TierB:! 95%-99.9% [$0.22 per min.] [$0.18 per min.]
[Tier C:1 90% - 94.9% [$0.18 per min.] [$0.17 per min.]
TTierD:] 85%-89.9% [$0.16 per min.] [$0.15 per min.]
[Tier B:] 0 - 84.9% [$0.15 per min.] [$0.15 per min.]
Appellee's Answering Br. at 22.
No. 94860-7
critical concept as the time the employee is on the phone resolving an inbound
customer call or performing certain postcall work."^ Defs.-Appellants' Opening Br.
at 4. "[PJroduction minutes [are] not generated by waiting for calls or making
outbound calls." Id. at 25. Nor are "production minutes" generated by time spent
reviewing workplace announcements, caring for workstations, logging on and off
Xerox's phone systems, or recording time sheets and work activities, either. Id. at
16. And call center employees are not compensated separately for those non-
incoming-call-resolution tasks, unless the employee's average hourly salary for the
workweek falls below the applicable minimum wage. In such cases, the employee
would be compensated separately for his or her nonproduction minutes by the
amount necessary to raise that employee's average hourly salary for the workweek
up to the minimum wage.^
^ The parties dispute whether the ABC rate applied to postcall work. Appellee's
Answering Br. at 6 n.4. Resolution of that dispute is not necessary to answer the certified
question presented. The critical and undisputed fact is that the ABC plan measured
production minutes based on actual clock time.
® Xerox paid a separate, hourly rate for specific, predefined activities, such as
training, staff meetings, work shortages, system down time, and breaks. Compensation for
time spent doing those activities is not in dispute.
No. 94860-7
C. The Practical Effect of Characterizing "Production Minutes" as Hourly
Wages or Piecework
During the time frame relevant to this case, the minimum wage for Federal
Way employees was between $8.67 and $9.04 per hour. Defs.-Appellants' Opening
Br. at 9-10 (citing Clerk's Papers(CP)at 552). But Federal Way employees did not
necessarily receive that minimum wage for every hour worked. That is because
Xerox applied workweek averaging—a concept applicable to piece rate work, but
not to hourly work—^to calculate minimum wage compliance. Under Xerox's
workweek averaging, an employee's high producing hours are used to offset their
low producing hours. Thus, unless the employee's average hourly salary for the
workweek fell below the applicable minimum wage,the employee would not receive
a minimum wage subsidy, even though the employee may have earned less than the
minimum wage during certain hours ofthe week.
Washington's Minimum Wage Act (MWA), chapter 49.46 RCW, permits
workweek averaging to determine minimum wage compliance for commission or
piece rate workers.^ But Washington's MWA does not permit such averaging for
hourly workers. Instead, hourly workers must receive their contractual rate of pay
® Pursuant to the MWA, agricultural workers who are paid by the piece must also
receive an hourly wage of at least minimum wage for work performed outside the scope of
"piece-rate picking." Carranza v. Dovex Fruit Co., 190 Wash. 2d 612, 617, 416 P.3d 1205
(2018).
6
No. 94860-7
or minimum wage, whichever is higher, for each hour worked. WAC 296-126-021;
see also DLI Admin. Policies ES.C.3 (Jan. 2, 2002), ES.A.3 (July 15, 2014).
D. Proceedings in District Court
The pivotal question here is whether Xerox employees under the ABC plan
were piece rate workers. Hill, a former employee at Xerox's Federal Way call center,
sued Xerox in federal district court. She claimed that Xerox failed to pay her(and a
class ofsimilarly situated employees and former employees)at least minimum wage
for all time worked, in violation of the MWA. Hill argued that Xerox's ABC plan
violated the MWA in two ways. Primarily, she argued that she was an hourly
employee, that Xerox paid her for only some minutes worked (her production
minutes) but not others, and that she is entitled to back pay for those unpaid,
nonproduction minutes. Appellee's Answering Br. at 19-24. Alternatively, Hill
argued that even if Xerox correctly classified her as a piece rate worker, Xerox still
owes her back pay for her nonproduction minutes. Id. at 27. She contended that she
is entitled to such back pay, even as a piece rate worker, based on Lopez Demetrio
V. Sakuma Brothers Farms, 183 Wash. 2d 649, 355 P.3d 258 (2015). She argues that
Lopez Demetrio requires employers to pay piece rate workers separately for their
nonproduction time. Appellee's Answering Br. at 28(quoting Lopez Demetrio, 183
No. 94860-7
Wn.2d at 652). She sought class certification and back wages based on both theories.
CP at 768-83.
Xerox acknowledges that it must pay its call center employees for all time
worked and that such payment must comply with the prevailing minimum wage.
Xerox argues that its ABC plan fully compensated Hill and the class "for all time
they worked." Defs.-Appellants' Opening Br. at 12. Xerox explains that the fact
that it measured compensation for all time worked based on the minutes spent
resolving inbound customer calls does not mean that it failed to pay its call center
workers for their other work—specifically, for their other, non-inbound-call work.
Xerox relied on contractual provisions explaining that compensation for all time
spent working would be measured by just a portion of the time spent working—^the
employee's production minutes. Id. at 15-17.
Xerox moved for partial summary judgment in federal district court on
multiple issues related to minimum wage and overtime compliance under the MWA.
The district court ruled that the resolution of all of those issues depended on
"whether the Federal Way workers are hourly employees (as Plaintiff [Hill]
contends) or pieceworkers (as Defendants contend)." CP at 134. The district court
resolved that foundational issue in Hill's favor and denied Xerox's motion. That
court explained that "the Federal Way employees [were] hourly workers" and
No. 94860-7
therefore were entitled to a per hour minimum wage. Id. The district court
recognized that classifying Xerox employees as hourly employees probably
oversimplified the mechanics of the ABC plan. Id. at 135. But it was concerned
that "were this Court to accept Defendants' description, every employer could pay
hourly workers a 'per-minute' rate and thereby avoid the Washington law governing
workers paid on a per-hour rate." Id. The district court was most concerned with
Xerox's use of actual clock time rather than estimated times, explaining that "[a]
system equating certain tasks to pre-established units of time [regardless of how
much time the tasks actually took] is very different than one that measures the
precise amount oftime a task takes. The former may resemble a piece[]rate system,
but the latter more closely resembles an hourly system." Id. at 136(emphasis added).
It therefore denied Xerox's motion for partial summaryjudgment.
The district court, however, recognized the novelty of Xerox's compensation
scheme and the decisive effect its decision had on the remaining portions of the
parties' wage dispute. It therefore certified its decision to the Ninth Circuit Court of
Appeals for immediate, interlocutory review. Id. at 129.
No. 94860-7
E. Proceedings in the Ninth Circuit
The Ninth Circuit accepted review, determined that resolution of the case
involved consideration of an open question of Washington state law, and certified
the following state law question to this court:
[W]hether an employer's payment plan, which includes as a metric an
employee's "production minutes," qualifies as a piecework plan under
[WAG §] 296-126-021?
Hill, 868 F.3d at 760. We accepted review. RAP 16.16; ch. 2.60 ROW.
II. Analysis
A. We Decline the Parties'Invitation To Revise the Certified Question
As a threshold matter, both Xerox and Hill ask us to reformulate the certified
question. Each complains that the question does not fully resolve their dispute.
Xerox describes the parties' underlying dispute as really one of hourly versus
nonhourly pay, regardless of what type of nonhourly compensation (commission,
salary, nondiscretionary bonus, piecework, or some other alternative pay structure)
the ABC plan implicates.^ Defs.-Appellants' Opening Br. at 45. Thus,the certified
^ The district court suggested, in a different case, that Xerox's ABC plan might
qualify as a commission-based schedule. Douglas v. Xerox Bus. Servs., LLC, No. C12-
1798-JCC, 2015 WL 10791972, at *4 n.3 (W.D. Wash. Dec. 1, 2015)(court order). But
the Ninth Circuit rejected Xerox's claim in this case that the ABC plan could be classified
as anything other than piece rate or hourly pay. Hill, 868 F.3d at 760 n.l (concluding that
"Xerox cannot seriously contend that its compensation plan was anything other than one
of these two systems": piece rate or hourly).
10
No. 94860-7
question, which asks only whether the ABC plan constitutes a piecework plan, does
not resolve Xerox's broader argument that the ABC plan qualifies as some other
nonhourly, nonpiecework plan, such as commission pay. Xerox asks that we reform
the certified question and instead answer'"whether an employer's payment plan that
pays based on production, but that includes as a unit of work an employee's
"production minutes," qualifies as an hourly compensation plan?"' Id. at 7.
Hill also seeks revision of the certified question, but she asks that we reframe
the issue in a different way. Appellee's Answering Br. at 14. She describes the issue
in this case, in part, as whether Xerox failed to pay its employees for their
nonproduction minutes. See id. at 1-2.
The Ninth Circuit acknowledges that neither party is satisfied with its certified
question and leaves the decision whether to reformulate that question to this court.®
We decline to do so. The parties have a broader dispute that they have more fully
briefed and argued in the Ninth Circuit. Whether "production minutes" constitute
piece rate work is just part of that larger case. But it is the foundation on which the
other arguments must stand. We therefore accept the Ninth Circuit's request for
guidance on only the narrow question presented: whether Xerox's ABC plan,"which
® Hill, 868 F.3d at 763 (citing Broad v. Mannesmann Anlagenbau AG, 196 F.3d
1075, 1076(9th Cir. 1999)(acknowledging that this court may in its discretion reformulate
certified questions when necessary to answer them)).
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No. 94860-7
includes as a metric an employee's 'production minutes,' qualifies as a piecework
plan under[WAC §] 296-126-021?" Hill, 868 F.3d at 760.
We answer that narrow, certified question in the negative and leave resolution
ofthe parties' broader wage dispute for the federal district court, in which the dispute
is filed.
B. Xerox's ABC Plan Does Not Qualify as a Piecework Plan under WAC 296-
126-021
Washington has a "'long and proud history ofbeing a pioneer in the protection
of employee rights.'" Int'l Ass'n ofFire Fighters, Local 46 v. City ofEverett, 146
Wash. 2d 29, 35, 42 P.3d 1265 (2002)(quoting Drinkwitz v. Alliant Techsystems, Inc.,
140 Wash. 2d 291, 300, 996 P.2d 582 (2000)). In 1913, Washington was one of the
first states to enact a statewide minimum wage for women and minors. LAWS OF
1913, ch. 174, § 2. In 1959, those minimum wage protections were expanded to
include men. Laws OF 1959, ch. 294,§§ 1-2. That expanded version became known
as the Washington MWA.^ Laws of 1961, Ex. Sess. ch. 18, § 6.
The legislature enacted these minimum wage laws to protect the health, safety,
and general welfare of its citizenry by ensuring that minimal employment standards
were met. RCW 49.46.005(1); LAWS OF 1913, ch. 174, § 1. Under those laws.
^ The act was briefly known as the Washington Minimum Wage and Hour Act, until
its name change in 1961. LAWS OF 1959, ch. 294, § 14.
12
No. 94860-7
Washington employers and employees generally remain free to negotiate the terms
of their employment relationship. But "an employer must pay an employee at least
the minimum wage for work" performed. Seattle Prof'I Eng'g Emps. Ass'n v.
Boeing Co., 139 Wash. 2d 824, 838,991 P.2d 1126(2000)(SPEEA)(emphasis added).
Thus, in SPEEA, this court ruled that an employment contract requiring an
employee to attend preemployment orientation sessions without pay is
unenforceable: it violates the rule that the employer must pay the employee at least
the minimum wage for work performed. Id. Similarly, in Stevens v. Brink's Home
Security, Inc., this court ruled that a contract denying employees compensation for
work time spent "on duty," driving company vehicles between their homes and
company jobsites, was unenforceable. 162 Wash. 2d 42,49,169 P.3d 473(2007). This
court explained, once again, that the MWA gives an employee the right to
compensation for all time worked.
To be sure, the regulations implementing the MWA make an exception to this
right to earn the minimum wage for every hour worked: they permit workweek
averaging for employees who are "paid on a commission or piecework basis, wholly
or partially." WAC 296-126-021. The certified question before us is whether
Xerox's ABC plan qualifies as piece rate compensation subject to workweek
averaging pursuant to that regulation. Id. We hold that it does not.
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No. 94860-7
WAC 296-126-021 authorizes employers to pay employees on a piecework
basis and establishes a formula for calculating minimum wage compliance for such
pay. (That formula includes workweek averaging.) But the regulation does not
define what compensation schemes fit within the meaning of piecework pay. The
Department of Labor and Industries (the agency tasked by the legislature with
enforcing the MWA and its implementing regulations) has not defined the scope of
piecework compensation either. That agency describes "[p]iece rate employees"
only as "usually paid a fixed amount per unit of work." DLI Admin.Policy ES.A.8.2
(July 15, 2014).'° It does not say whether time—specifically, minutes—constitutes
a "unit of work."
Xerox argues that its ABC plan fits within the agency description ofpiece rate
because the plan compensates call center workers a "fixed amount"(their per minute
ABC rate) on a "per unit of work" measurement—and it describes the unit as the
"production minute." Hill disagrees with that classification. She argues that if
employers were allowed to use an employee's clock time as a "unit of work," then
employers could circumvent the MWA's bar against workweek averaging simply by
classifying.their employees' otherwise hourly salaries as piece rate units.
'° Consistent with that general description, we recently described "piece rate" as
"tied to the employee's output (for example, per pound of fruit harvested) and is eamed
only when the employee is actively producing." Lopez Demetrio, 183 Wash. 2d at 652.
14
No. 94860-7
We agree with Hill. The MWA does not permit employers to use clock time
as a "unit of work" for piece rate pay. A contrary rule would allow WAC 296-126-
02rs limited exception for workweek averaging to swallow up the general rule
barring workweek averaging for hourly employees. Under Xerox's interpretation,
employers would be able to pay their workers less than minimum wage for each hour
worked—something they are not allowed to do under the hourly system—simply by
classifying portions of the employees' work time as piece rate units.
This proposed interpretation of WAC 296-126-021 is inconsistent with our
duty to liberally construe the provisions of the MWA,including its corresponding
regulations, in favor of workers' protections and their right to be paid a minimum
wage for each hour worked. Becerra Becerra v. Expert Janitorial, LLC, 181 Wash. 2d
186, 195,332P.3d415(2014){oiXmg Int'I Ass'n ofFire Fighters, 146 Wash. 2d at 45);
ROW 49.46.005. Indeed, our precedent requires this court to make sure that the
MWA '""be liberally construed [in favor ofthe employee] and that its exceptions be
narrowly confined.'"" Int'l Ass'n ofFire Fighters, 146 Wash. 2d at 34 (alteration in
original){c^olmg Peninsula Sch. Dist. No. 401 v. Pub. Sch. Fmps., 130 Wash. 2d 401,
407, 924 P.2d 13 (1996) (interpreting a collective bargaining statute) (quoting
Nucleonics All, Local Union No. 1-369 v. Wash. Pub. Power Supply Sys., 101
Wash. 2d 24, 29, 677 P.2d 108 (1984))).
15
No. 94860-7
We therefore answer no to the certified question. We answer no more than
that. We understand that compensation plans in other industries are sometimes
based on estimated times, as opposed to actual clock times." Our decision today
does not address the characterization of those plans. We also understand that the
parties dispute whether the ABC plan qualifies as some other measure of nonhourly
pay that could qualify for workweek averaging. That question is not before us either.
Our holding is limited to answering the certified question.
Conclusion
We answer the certified question from the Ninth Circuit in the negative. We
hold that actual clock hours cannot be used as a piece rate measure under WAC 296-
126-021.
"For example, automotive repair shops sometimes pay their mechanics predefined
hours (known as "flag hours") for each particular repair job, regardless of how long it
actually takes the mechanic to complete the job. Sandoval v. Ml Auto Collisions Ctrs.,
No. 13-CV-03230-EDL, 2016 WL 6561580, at *2(N.D. Cal. Sept. 23,2016)(court order)
(mechanics); Gonzalez v. Downtown LA Motors, LP, 215 Cal. App. 4th 36, 41, 155 Cal.
Rptr. 3d 18 (2013)(mechanics); see also Green v. Lawrence Serv. Co., No. LA CV 12-
06155 JAK (VBKx), 2013 WL 3907506 (C.D. Cal. July 23, 2013)(court order)(wages
based on estimated time it takes to set up retail displays for mobile vendors); Gen.
Teamsters Local No. 174exrel. Gascav. Safeway, /nc.,noted at 156 Wn. App. 1003,2010
WL 1981821, at *2(driver wages based on estimated trip time).
16
No. 94860-7
WE CONCUR:
-fOM iMyiuir , Ci
i ^
17
Hill V. Xerox Business Services, LLC, et al.
(Stephens, J., dissenting)
No. 94860-7
STEPHENS, J. (dissenting)—Starting from the flawed premise that
"production minutes" are "actual clock hours," the majority invalidates Xerox's
achievement based compensation (ABC) plan as essentially a cleverly disguised
hourly compensation scheme. Majority at 15-16. This is contrary to the way the
plan actually functions. While using increments of time as p^ of a performance
metric, the ABC plan is a pure piece-rate plan that compensates employees based on
units of work, not by the minute or hour. I would answer the certified question, yes,
an employer's compensation plan, which includes as a metric an employee's
"production minutes," may qualify as a piecework plan under WAC 296-126-021. I
respectfully dissent.
ANALYSIS
Washington's Minimum Wage Act(MWA),ch. 49.46 RCW,recognizes that
employers may compensate their employees in a variety of ways. It expresses no
preference for any particular method of compensation. Relevant here, employers
Hill V. Xerox Business Services, LLC, et al, 94860-7(Stephens, J., dissenting)
can pay their employees a piece rate for units of work, irrespective of time. "Piece
rate employees are usually paid a fixed amount per unit of work"—for example,
$0.75 per apple picked, $0.10 per widget produced, or $5.00 per mile driven. Wash.
Dep't of Labor & Indus., Emp't Stds. Admin.Policy ES.A.8.2 (revised July 15,
2014), http;//www.lni.wa.gov/WorkplaceRights/files/policies/esa82.pdf [https://
perma.cc/J4RE-S78Y]. Alternatively, employers can pay their employees an hourly
rate for each hour worked, irrespective of productivity. The distinction between
these two methods of compensation forms the backdrop to the certified question
because how employees are paid determines the applicable minimum wage rules and
regulations. Hill v. Xerox Bus. Servs., LLC,868 F.3d 758, 761 (9th Cir. 2017).
Minimum wage compliance under Washington law is determined differently
for piece-rate employees than for hourly employees. When an employee is paid on
a piecework basis, as opposed to an hourly basis, employers may use workweek
averaging to determine whether the employee's overall compensation complies with
the MWA. See WAC 296-126-021; Wash.Dep't of Labor & Indus.,Emp't Stds.
Admin. Policy ES.A.3 (revised July 15, 2014), http://www.lni.wa.gov/Workplace
Rights/files/policies/esa3.pdf[https://perma.cc/7XWG-6FE8]. "In other words, as
long as the total wages paid for a given week, divided by the total hours worked that
week, averages to at least the applicable minimum wage," the piece-rate employee's
-2-
Hill V. Xerox Business Services, LLC, et al, 94860-7(Stephens, J., dissenting)
compensation complies with Washington law. Hill, 868 F.3d at 759. In contrast,
when an employee is paid on an hourly basis, the hourly employee "'retain[s] a per-
hour right to minimum wage under Washington law,'" and workweek averaging is
not permitted. Id.(alteration in original)(quoting Alvarez v. IBP,Inc., 339 F.3d 894,
912(9th Cir. 2003), aff'd, 546 U.S. 21, 126 S. Ct. 514, 163 L. Ed. 2d 288 (2005)).
Given the differences between piecework compensation and hourly
compensation, the correct characterization of Xerox's ABC plan is critical to
determining whether the plan complies with Washington law. As the majority
explains, the distinction is particularly important in this case because "[i]f the
'production minute' forms the basis for a bona fide piecework system, then one set
of minimum wage rules and regulations apply. But if the 'production minute'
instead forms the basis for an hourly payment system,then another set ofhourly and
minimum wage protections apply." Majority at 2.^
^ While the majority initially reeognizes that "Washington's [MWA] permits
workweek averaging to determine minimum wage compliance for commission or piece
rate workers," majority at 6, it later casts workweek averaging under WAG 296-126-021
as a "limited exception" to "the general rule barring workweek averaging for hourly
employees." Id. at 14. This description is confusing at best. WAG 296-126-021 is not a
"limited exception" to an employee's right to cam the minimum wage for every hour
worked. See id. at 13. All employees have that right. Workweek averaging is simply a
permitted method for ensuring that commission or piece-rate employees receive at least the
minimum wage for all hours worked. The majority's "limited exception" versus "general
rule" language seems to suggest that hourly pay is Washington's preferred method of
compensation, but the MWA expresses no such preference. As noted, Washington law
affords employers the flexibility to choose among various compensation models, so long
-3-
Hill V. Xerox Business Services, LLC, et al, 94860-7(Stephens, J., dissenting)
I would hold that the time-based units used in Xerox's ABC plan—
"production minutes"—qualify as piecework units because they are functionally a
metric ofproduction, not a measurement oftime, as they are "tied to the employee's
output." Lopez Demetrio v. Sakuma Bros. Farms, 183 Wn,2d 649, 652, 355 P.3d
258(2015).
A "Production Minute" May Qualify as a "Unit of Work"
under Washington Law
The certified question requires us to determine what exactly is "a piecework
plan under[WAG] 296-126-021." Hill, 868 F.3d at 763. Neither WAG 296-126-
021 nor the statutory text of the MWA explicitly defines the term "piecework."
WAG 296-126-021 establishes that employees "paid on a commission or piecework
basis, wholly or partially," are entitled to a minimum wage based on a workweek
period. This simply means that a piecework employee's compensation complies
with Washington law so long as the total wages paid in a workweek divided by the
total hours worked that week averages to at least the applicable minimum wage. The
MWA and its corresponding regulations also authorize employers to measure
minimum wage compliance on a piecework basis, without expressly defining the
term "piecework." RGW 49.46.020; WAG 296-126-020(1)("Every employer shall
as employees receive at least the applicable minimum wage and are paid for all hours
worked.
-4-
Hill V. Xerox Business Services, LLC, et al., 94860-7(Stephens, J., dissenting)
pay to each of his or her employees ... a rate of pay per hour which is equal to the
hourly rate required by RCW 49.46.020 . . . , whether computed on an hourly,
commission,piecework, or other basis."(emphasis added)).
In the absence of definitional clarity from the legislature, we look to the
Department of Labor and Industries (DLI) and our case law for further guidance.
According to DLI, "[pjiece rate employees" are "usually paid a fixed amount per
unit of work." Wash. Dep't of Labor & Indus., Emp't Stds. Admin. Policy
ES.A.8.2. "For example, in a manufacturing plant, workers are paid 10 cents per
widget they make on the production line."^ In Lopez Demetrio, we described piece-
rate pay in a similar way: "A piece rate is tied to the employee's output(for example,
per pound of fruit harvested) and is earned only when the employee is actively
producing." 183 Wash. 2d at 652. A working definition of the term "piecework"
emerges from this guidance. Under a piecework plan, employees are paid a fixed
^ This definition appears on the DLI website, as cited by the Ninth Circuit, and states
in its entirety:
Piece rate payment is usually a price paid per unit of work. For example, in
a manufacturing plant, workers are paid 10 cents per widget they make on
the production line. The worker is entitled to minimum wage, however. So
if the pay per piece does not equal minimum wage for the time it took to
create those pieces, the business must make up the difference so the worker
gets at least niinimum wage for the time worked.
Wash. St. Dep't of Lab. & Industry, Commissions, Piece Rate & Bonuses,
https://www.hu.wa.govAVorkpIaceRights/Wages/PayReq/ComniBonus/default.asp
[https: //perma.cc/6CQB-BN8U].
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Hill V. Xerox Business Services, LLC, et al, 94860-7(Stephens, J., dissenting)
rate for each "unit of work" produced (not a set hourly rate for each hour worked).
Wash.Dep't of Labor & Indus.,Emp't Stds. Admin.Policy ES.A.8.2. And,the
"unit of work," or "piece," must be "tied to the employee's output" and production.
Lopez Demetrio, 183 Wash. 2d at 652. In other words, a "unit of work" must be some
metric of production, not merely a measurement oftime.
Applying this definition to the certified question,the primary issue in this case
is whether "production minutes" under Xerox's ABC plan qualify as "units of work"
when they are "tied to the employee's output." See Hill, 868 F.3d at 762 ("The
central question here, however, is whether 'production minutes' can be classified as
a unit of work.").
Xerox's ABC Plan Is an Incentive-Based Model That Uses "Production
Minutes"as Part ofthe Metricfor Measuring Employee Performance
The ABC plan primarily compensates employees for their productivity. It
uses a three-part metric for measuring productivity, based on "rep resolve"
(customer satisfaction as reported in surveys), "average handle time"(AHT) for
calls, and "production minutes."^ Clerk's Papers(CP)at 491. "Production minutes"
are generated while an employee is on an incoming call, on hold during an incoming
^ Xerox pays employees on a separate, hourly basis for specific, non-call-related
activities, such as training, staff meetings, work shortages, system down time, and breaks.
Employees may also receive separate bonuses for meeting predefined achievement goals,
or based on special client-sponsored incentive programs. Compensation outside of the
ABC plan is not in dispute.
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Hill V. Xerox Business Services, LLC, et al, 94860-7(Stephens, J., dissenting)
call, or completing after-call work related to the incoming call. Hill, 868 F.3d at
760. The ABC plan structures employee compensation around "production
minutes" because that is how Xerox sells its product to its client, Verizon—^by the
"production minute." As specified in the Verizon contract, Verizon pays Xerox
based on the number of"production minutes" the Federal Way call center generates.
CP at 488.4
In order to calculate an employee's pay, the ABC plan first determines a
compensation rate based on "rep resolve" and "AHT." Id. at 491. It then multiplies
the employee's rate ofpay by the total number of"production minutes"the employee
logs each week to determine the employee's weekly ABC pay. While focusing on
employee productivity, the ABC plan guarantees that employees will be paid at least
the minimum wage for all hours worked, regardless of production. To ensure that
every employee receives at least the legal minimum wage for all time worked,Xerox
calculates each employee's hourly rate by dividing the employee's weekly
production-based pay by the total number of hours worked that week. Ifthat hourly
rate falls below the applicable minimum wage rate, Xerox pays the difference to the
employee as "subsidy pay" in a lump-sum amount, which is added to the employee's
weekly paycheck. Hill, 868 F.3d at 761. In this regard, it is not possible for an
4 Notably, this contract limits "production minutes" to 507 average seconds per eall
received. CP at 488.
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Hill V. Xerox Business Services, LLC, et al, 94860-7(Stephens, J., dissenting)
employee to be paid less than minimum wage for all recorded hours worked, even if
the employee never answers a single call. Ifan employee reports to work on Monday
and leaves work on Friday without generating any "production minutes" that week,
the employee will still be paid at the applicable minimum wage rate for every
recorded hour worked.
To properly understand how the ABC plan functions, it is important to
appreciate that it was created as "an incentive-based model rewarding agents who
were efficient at dealing with customer issues." Id. at 760.^ Prior to 2009, Xerox
paid employees a fixed rate for every incoming call the employee handled. Defs.-
Appellants' Opening Br. at 3; CP at 543-44. Unsurprisingly, Xerox used each call
as the production unit in order to incentivize employees to handle more calls. At the
end of each workweek, Xerox tracked the number of incoming calls the employee
received and multiplied that number by certain production rates to determine the
employee's weekly ABC pay. CP at 543-44. If an employee did not handle enough
calls for the weekly ABC pay to reach the legal minimum wage rate, Xerox paid the
^ The majority prefers not to recognize the ABC plan as an incentive-based model
but as one under which "an employee's high producing hours are used to offset their low
producing hours." Majority at 6. The suggestion is that because Xerox uses workweek
averaging, "Federal Way employees did not necessarily receive that minimum wage for
every hour worked." Id. The majority's characterization unnecessarily casts a cloud over
the use of workweek averaging to calculate piece-rate pay—a practice that is not in
question in this case and is specifically authorized under WAG 296-126-021. See Hill, 868
F.3d at 762-63.
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Hill V. Xerox Business Services, LLC, et al., 94860-7(Stephens, J., dissenting)
difference so the employee was always paid at least the minimum wage on a weekly
basis. As under the current plan, this call-based ABC plan focused on employee
productivity and paid employees per unit of production.
The ABC plan was eventually modified to use "production minutes" rather
than calls as the measure ofproductivity. Xerox made this change in part to address
ernployee concerns about the unfairness ofpaying the same amount for all incoming
calls, regardless of duration. Id. Under the call-based ABC plan, employees earned
the same amount for any call they received, whether the call lasted for 30 minutes
or 30 seconds. Defs.-Appellants' Opening Br. at 23. The ABC plan was also
modified because Xerox's contract with Verizon changed to provide that Xerox
would be compensated for the number of "production minutes" generated by the
Federal Way call center. As noted, Verizon currently purchases minutes of specific
call-related activities—"^production minutes"—from Xerox. CP at 543-44.
Although the ABC plan switched to a different unit of measurement—"^production
minutes" rather than calls—everything else about the plan remained the same, and
the focus remained on incentivizing productivity. Thus,"just like a fruit-seller trying
to maximize the amount offiuit he has to sell by incentivizing his employees to pick
more through a piecework system, Xerox sought to maximize the amount of minutes
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Hillv. Xerox Business Services, LLC, et al, 94860-7(Stephens, J., dissenting)
it could charge . . . by incentivizing its agents to generate more 'production
minutes.'" Hill, 868 F.3d at 762.
Although described in terms oftime segments,"production minutes" function
as units of work. Like the apple farmer who produces and sells apples, Xerox
produces and sells units of customer service—"production minutes"—^which its
employees generate while assisting Verizon customers. It may seem unusual for an
employer to use time-based units as a basis for piece-rate pay, but the MWA does
not prohibit it. Nothing in Washington law requires that a unit of work in a
piecework plan be a tangible item, like a shirt or a piece of fruit. To the contrary,
employers often compensate pieceworkers for intangible work activities or based on
qualitative metrics, such as miles driven, pounds of fhiit harvested, or calls taken.
No one refutes that the prior version of the ABC plan, which used individual calls
rather than "production minutes," qualified as a piecework plan under WAG 296-
126-021. Rather than focusing on the label "minutes," we should consider that
Xerox's ABC plan simply "responds to a modem problem—one in which the
'goods' are not always tangible." Id. So long as the "piece" is "tied to the
employee's output," I see no reason why a unit of work may not simultaneously be
a measurement oftime and a measurement of production. While the ABC plan may
seem novel in its choice of production unit, there is nothing unusual about how the
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Hill V. Xerox Business Services, LLC, et al, 94860-7 (Stephens, J., dissenting)
production unit actually functions—each "production minute" is a compensable unit
of work that Xerox sells.
The majority cannot get past the fact that minutes are segments of time.
Indeed, it characterizes "production minutes" as comprising "actual clock hours."
Majority at 16. Thus, it concludes that "[t]he MWA does not permit employers to
use clock time as a 'unit of work' for piece rate pay." Id. at 14. The majority fears
that "[a] contrary rule would allow the WAC 296-126-02rs limited exception for
workweek averaging to swallow up the general rule barring workweek averaging for
hourly employees." Id. In the majority's view,"if employers were allowed to use
an employee's clock time as a 'unit of work,' then employers could circumvent the
MWA's bar against workweek averaging [for hourly employees] simply by
classifying their employees' otherwise hourly salaries as piece rate units." Id.
I believe the majority's characterization of the ABC plan disregards how the plan
actually functions. As the certification order recognizes, "production minutes" are
not clock time; "even though two employees may work the same number of total
hours, one will earn more money if, during those hours, he spends more time than
the other agent on incoming calls—just like a person who picks more strawberries."
Hill, 868 F.3d at 762 n.6.
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Hill V. Xerox Business Services, LLC, et al, 94860-7(Stephens, J., dissenting)
Because Xerox employees are paid for their production units rather than for
their time, the majority's reliance on Seattle Professional Engineering Employees
Ass'n V. Boeing Co., 139 Wash. 2d 824,991 P.2d 1126(2000){SPEEA)and Stevens v.
Brink's Home Security, Inc., 162 Wash. 2d 42, 169 P.3d 473 (2007) is misplaced.
Majority at 12-13. SPEEA and Stevens involve hourly workers who were
contractually required to perform certain work activities without any pay. The
employees in SPEEA were required to attend unpaid orientation sessions, while
those in Stevens were not compensated for certain travel time on the job. Here,there
are no unpaid workers or unpaid time, just a "somewhat complex" compensation
method. Hill, 868 F.3d at 760.
I disagree with the majority's assumption that employers will use time-based
production units as a strategy for circumventing minimum wage laws. Under a
piecework plan, employers must pay their employees a set amount for each "unit of
work" produced. And,the "unit of work" must be "tied to the employee's output."
Lopez Demetrio, 183 Wash. 2d at 652. Employers may not arbitrarily pay hourly
workers a "per minute" rate in an effort to transform hourly pay into piece-rate pay.
To qualify as a piecework plan, compensation measured by work minutes must be
I
tied directly to some productivity metric, such as the "production minutes" at issue
in this case. Here, Xerox markets and sells a specific product to Verizon—a
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Hillv. Xerox Business Services, LLC, et al, 94860-7(Stephens, J., dissenting)
"production minute." Verizon in turn pays Xerox for the number of "production
minutes" Xerox generates. Federal Way employees produce each "production
minute" that is eventually sold to Verizon. The entire business model involves the
same unit of production: Xerox sells "production minutes," the Federal Way
employees produce "production minutes," and Verizon purchases "production
minutes." Recognizing the ABC plan as a piecework plan will not open the door to
abusive practices. Employers cannot "simply . . . classify[] portions of the
employees' work time as piece rate units," as the majority assumes. Majority at 15.
There must be, as here, an actual unit of production.
CONCLUSION
Xerox's ABC plan compensates employees based on their production, not
their clock time at work. Under WAC 296-126-021,this compensation plan, which
includes as a metric an employee's "production minutes," may qualify as a
piecework plan when the "production minutes" function as a metric of production
tied to the employee's output. I would answer yes to the certified question.
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Hill V. Xerox Business Services, LLC, et al, 94860-7(Stephens, J., dissenting)
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