Tiffany Hill v. Xerox Business Services

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

TIFFANY HILL, individually and No. 14-36029

on behalf of all others similarly

situated, D.C. No.

Plaintiff-Appellee, 2:12-cv-00717-JCC

v.

CERTIFICATION

XEROX BUSINESS SERVICES, LLC; ORDER TO THE

LIVEBRIDGE INC., an Oregon WASHINGTON

Corporation; AFFILIATED SUPREME COURT

COMPUTER SERVICES INC., a

Delaware Corporation;

AFFILIATED COMPUTER SERVICES

LLC, a Delaware Limited

Liability Company,

Defendants-Appellants.

Filed August 7, 2017

Before: Richard A. Paez and Consuelo M. Callahan,

Circuit Judges, and Morrison C. England,* District Judge.

*

The Honorable Morrison C. England, Jr., United States District

Judge for the Eastern District of California, sitting by designation.

2 HILL V. XEROX BUSINESS SERVICES

SUMMARY**

Certification to Washington Supreme Court

The panel certified to the Washington Supreme Court the

following question:

Whether an employer’s compensation plan,

which includes as a metric an employee’s

“production minutes,” qualifies as a

piecework plan under Wash. Admin. Code

§ 296-126-021?

COUNSEL

Todd L. Nunn and Patrick M. Madden, K&L Gates LLP,

Seattle, Washington, for Defendants-Appellants.

Marc C. Cote and Toby J. Marshall, Terrell Marshall Daudt

& Willie PLLC, Seattle, Washington; Jon W. MacLeod,

MacLeod LLC, Seattle, Washington; Daniel F. Johnson,

Breskin Johnson & Townsend PLLC, Seattle, Washington;

for Plaintiff-Appellee.

**

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

HILL V. XEROX BUSINESS SERVICES 3

ORDER

This case arises from a dispute between Tiffany Hill

(“Hill”) and Xerox Business Services, LLC and its

predecessor companies (collectively, “Xerox”), over the

method by which Xerox calculated wages owed to Hill and

others similarly situated. Hill brought a statewide class

action lawsuit against Xerox for unpaid wages under the

Washington Minimum Wage Act (“MWA”), Wash. Rev.

Code § 49.46 et seq., and the Washington Consumer

Protection Act, Wash. Rev. Code § 19.86 et seq. This

interlocutory appeal involves only Hill’s claims under the

MWA.

Under Washington law, when an employee is paid on a

piecework basis, as opposed to an hourly basis, it is

permissible for an employer to determine whether the

employee’s compensation complies with the MWA on the

basis of a work-week period. See Wash. Admin. Code § 296-

126-021; Dept. of Labor and Indus. Admin. Policy ES.A.3.

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, an employee’s

compensation complies with Washington law. On the other

hand, if an employee is an hourly employee, he “retain[s] a

per-hour right to minimum wage under Washington law,” and

weekly averaging is not permitted. Alvarez v. IBP, Inc.,

339 F.3d 894, 912 (9th Cir. 2003); see also Wash. Rev. Code

§ 49.46.020.

The parties do not dispute the applicability of

Washington’s framework for determining whether an

employer’s compensation plan complies with Washington’s

minimum wage law. Rather, they dispute whether Hill was

4 HILL V. XEROX BUSINESS SERVICES

an hourly employee or a piecework employee.1 Hill claims

that she was an hourly employee and therefore Xerox violated

the MWA by determining her hourly wage based on a work-

week, as opposed to a per-hour, calculation. Xerox, in

contrast, contends that Hill was a piecework employee and

therefore its work-week calculations were sanctioned by

Washington Administration Code Section 296-126-021. In

the district court, Xerox moved for partial summary judgment

on this issue, which the district court denied, stating that

Xerox was not paying its employees on a piecework basis,

and therefore summary judgment was inappropriate. After

denying a motion to reconsider, the district court certified

Xerox’s request for an immediate interlocutory appeal of its

denial of partial summary judgment. We granted Xerox’s

request, and this appeal followed. We have jurisdiction

pursuant to 28 U.S.C. § 1292(b).

This order certifies to the Washington Supreme Court the

dispositive question of state law before us—namely, whether

an employer’s payment plan, which includes as a metric an

employee’s “production minutes,” qualifies as a piecework

plan under Washington Administrative Code Section 296-

126-021?2

1

On appeal, Xerox contends that the district court erred in creating a

false dichotomy by only considering two different pay systems of many

available. In our view, however, Xerox cannot seriously contend that its

compensation plan was anything other than one of these two systems.

2

Hill’s Motion for Certification to the Washington Supreme Court is

denied as moot.

HILL V. XEROX BUSINESS SERVICES 5

I.

Before addressing the certified question, we summarize

the material facts.3 Xerox operates call centers where they

respond to calls for third-party clients such as phone

companies, hotels, and airlines. Hill worked as an employee

at the call center located in Federal Way, handling phone

calls from Verizon Wireless customers. During Hill’s entire

tenure and until mid-2014, Xerox paid its call agents under

the Achievement Based Compensation (“ABC”) Plan. Under

the ABC Plan, all employees’ pay derived from three

different sources: (1) ABC Pay, (2) Additional Pay, and

(3) Subsidy Pay. As the system is somewhat complex, a

description of the three sources follows.

First, Xerox primarily used ABC Pay to compensate its

employees. ABC Pay was an incentive-based model

rewarding agents who were efficient at dealing with customer

issues. The ABC Plan required employees to track all of their

time expended on certain activities—ranging from receiving

calls to performing follow-up work. “Some of these

activities—such as receiving inbound calls—[were] paid on

a per minute basis, and each minute [was] referred to as a

‘production minute.’” “Production minutes” were only

generated when an agent was either on an incoming call, on

hold during an incoming call, or completing after-call work

related to the incoming call. The rate at which Xerox payed

for “production minutes” was determined by both “qualitative

and efficiency measures.” The qualitative measure included

two components: (1) supervisor evaluations of the employee,

and (2) employee success in resolving the customer’s issues.

The efficiency measure was based on the employee’s ability

3

With respect to this appeal, there are no material facts in dispute.

6 HILL V. XEROX BUSINESS SERVICES

to keep his average time spent on calls/call-related activities

at or below a set number determined by Xerox. The rates at

which employees were paid for their “production minutes”

varied from fifteen cents per minute to twenty-five cents per

minute. To determine an individual’s ABC Pay for the week,

Xerox took the total “production minutes” per week and

multiplied it by the employee’s per-minute rate. All other

logged ABC time—i.e., non-“production minutes”—were not

given a rate, but were tracked and appeared on an agent’s pay

statements.

Second, Xerox used Additional Pay to compensate its

agents for some tasks that were not covered by ABC Pay.

These defined activities included (1) training,

(2) meeting/coaching, (3) work shortages, (4) system down

time, (5) non-ABC Pay tasks or special projects, and

(6) break pay. These activities were always paid at a standard

hourly rate based on Washington’s minimum wage for the

applicable year.

Third, Xerox used Subsidy Pay to supplement an agent’s

wages if Xerox determined that the employee’s hourly rate

did not comply with minimum wage. To determine whether

this supplement was necessary, Xerox took the Subsidy Pay

rate (the minimum wage) and multiplied it by the total hours

worked in a given week to calculate an employee’s minimum

pay. If that amount was greater than the result of adding an

employee’s ABC Pay to his Additional Pay, then the

difference would be paid to the employee as Subsidy Pay in

a lump-sum amount.

HILL V. XEROX BUSINESS SERVICES 7

II.

A.

We turn to the issue that is the basis of our certification

order. In Washington there are multiple ways to compensate

employees. We discuss the two that are relevant to this

dispute. First, employers can pay their employees under a

piecework system. According to the Washington State

Department of Labor and Industries, “[p]iece 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.”4 See also Dept. of Labor

and Indus. Admin. Policy ES.A.8.2 (“Piece rate employees

are usually paid a fixed amount per unit of work.”). Second,

employers can pay their employees a set hourly rate for their

work, otherwise known as an hourly wage.

As discussed supra, this distinction in how employees are

paid is critical because employees who are paid hourly rates

“retain a per-hour right to minimum wage under Washington

law.” Alvarez, 339 F.3d at 912. Piecework employees, on

the other hand, are entitled to a minimum wage based on a

work-week period.5 Wash. Admin. Code § 296-126-021. As

4

This definition appears on the Department of Labor and Industries’

website, available at http://lni.wa.gov/WorkplaceRights/Wages/PayReq

/CommBonus/default.asp (last visited July 28, 2017). Our research did

not reveal a definition of “piece rate” within Washington’s Revised Code

or Washington’s Administrative Code.

5

According to Washington’s Department of Labor and Industries

Administrative Policy ES.A.3, “In order to determine whether an

employee has been paid the statutory minimum hourly wage when the

employee is compensated on other than an hourly basis, the following

8 HILL V. XEROX BUSINESS SERVICES

the district court properly noted, the issue on summary

judgment was “whether the Federal Way workers [were]

hourly employees (as [Hill] contends) or pieceworkers (as

[Xerox] contend[s]).” If they were hourly employees, Hill’s

claim can move forward, whereas if they were pieceworkers,

Hill’s claim fails.

B.

As the district court noted, and as observed by the parties

in their appellate briefs, there is simply no caselaw on

whether a compensation plan such as Xerox’s qualifies as a

piecework system. The parties agree that a piecework system

generally compensates employees a set amount per unit of

work—i.e., apples picked, tax returns completed, miles

driven. The central question here, however, is whether

“production minutes” can be classified as a unit of work. A

brief discussion of both sides’ arguments reveals that the

issue is a close one, and one that we believe the Washington

Supreme Court should decide in the first instance.

According to both Hill and the district court, Xerox’s

system of labeling minutes as “production minutes” is

nothing but a strategy for circumventing the law. As the

district court explained, “agents being paid for ‘production

minutes’ are being paid on precise units of time.” If a

“minute” could be a unit of work, “every employer could pay

standards should be used: . . . For employees paid on commission or

piecework basis, wholly or in part, . . . the commission or piecework

earnings earned in each workweek are credited toward the total wage for

the pay period. The total wage for that period is determined by dividing

the total earnings by the total hours worked; the result must be at least the

applicable minimum wage for each hour worked.”

HILL V. XEROX BUSINESS SERVICES 9

hourly workers a ‘per-minute’ rate and thereby avoid the

Washington law governing workers paid on a per-hour rate.”6

There is certainly merit to this argument; defining a unit of

production as a minute is clearly based on a measurement of

time. And, the fact that potentially every employer could use

such a system to possibly circumvent wage and hour laws,

would be problematic for low-wage workers.

On the other hand, as Xerox points out, simply stating that

the ABC Plan is not a piecework compensation system

because it is novel in its application of units of time as

production units is an overly simplistic analysis that ignores

how the plan actually functions. To some extent, that

characterization elevates the form of the production

unit—time—over how it functions—as a compensable unit of

production being sold. Xerox is paid by Verizon on the basis

of “production minutes” that its employees spend in assisting

Verizon customers. As a result, just like a fruit-seller trying

to maximize the amount of fruit he has to sell by

incentivizing his employees to pick more through a

piecework system, Xerox sought to maximize the amount of

minutes it could charge Verizon by incentivizing its agents to

generate more “production minutes.” Although it may seem

odd for a unit of work to be simultaneously a measurement of

time, this does not necessarily mean it cannot be so. In a

6

Hill also argues that the ABC Plan cannot be a piecework plan

because call center employees who work the same number of hours, and

are paid the same per-minute rate, receive the exact same pay. Hill’s

contention is incorrect, as Xerox points out in its reply brief. It is not the

total hours worked, but the total minutes spent on incoming calls, that

determines an employee’s pay. So, 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.

10 HILL V. XEROX BUSINESS SERVICES

sense, Xerox’s compensation system responds to a modern

problem—one in which the “goods” are not always tangible.

Xerox cites to several documents demonstrating that

“production minutes” are an accepted standard in the call

center industry. These documents hardly establish an

industry standard, but they do nominally support the idea that

compensating employees on a per-minute basis arises out of

the unique situation facing call centers.

III.

Although the parties contentiously argue over an array of

issues, the critical issue in this case is whether Xerox’s

compensation plan complies with Washington law. There is

no controlling precedent on this issue and its resolution is

necessary to resolve Xerox’s appeal. Further, this issue

potentially affects swaths of workers in the current

Washington economy, and elsewhere, and is therefore a

matter of important public policy. See Kremen v. Cohen,

325 F.3d 1035, 1037 (9th Cir. 2003) (“The certification

procedure is reserved for state law questions that present

significant issues, including those with important public

policy ramifications, and that have not yet been resolved by

the state courts.”). In this case alone, there allegedly are

approximately 10,000 low-wage workers affected.

Accordingly, we believe that the Washington Supreme Court

should decide the issue.

Because the controlling question of state law is not

settled, we have concluded that the appropriate course of

action is to certify this issue to the Washington Supreme

Court and request that it provide the dispositive answer. If

the Washington Supreme Court concludes that the ABC Plan

is an hourly plan, we will affirm the district court on that

HILL V. XEROX BUSINESS SERVICES 11

basis. If, however, the Washington Supreme Court

determines that the ABC Plan is a piecework plan, we will

vacate the district court’s order denying partial summary

judgment to Xerox.

IV.

Because it is “necessary to ascertain the local law of this

state in order to dispose” of this appeal, Wash. Rev. Code

§ 2.60.020, we respectfully certify to the Washington

Supreme Court the following question: whether an

employer’s compensation plan, which includes as a metric an

employee’s “production minutes,” qualifies as a piecework

plan under Wash. Admin. Code § 296-126-021?

We do not intend our framing of this question to restrict

the Washington Supreme Court’s consideration of any issues

that it determines are relevant. If the Washington Supreme

Court decides to consider the certified question, it may, in its

discretion, reformulate the question. Broad v. Mannesmann

Anlagenbau AG, 196 F.3d 1075, 1076 (9th Cir. 1999).

If the Washington Supreme Court accepts review of the

certified question, we designate appellant Xerox as the party

to file the first brief pursuant to Washington Rule of

Appellate Procedure (“WRAP”) 16.16(e)(1).

The clerk of our court is hereby ordered to transmit

forthwith to the Washington Supreme Court, under official

seal of the United States Court of Appeals for the Ninth

Circuit, a copy of this order and all relevant briefs and

excerpts of record pursuant to Washington Revised Code

Sections 2.60.010, 2.60.030 and WRAP 16.16. The record

12 HILL V. XEROX BUSINESS SERVICES

contains all matters in the pending case deemed material for

consideration of the local law question certified for answer.

Further proceedings in our court are stayed pending the

Washington Supreme Court’s decision whether it will accept

review, and if so, receipt of the answer to the certified

question. This case is withdrawn from submission and the

clerk is directed to administratively close this docket, pending

further order from this court. When the Washington Supreme

Court decides whether or not to accept the certified question,

the parties shall file a joint report informing this court of the

decision. If the Washington Supreme Court accepts the

certified question, the parties shall file a joint status report

every six months after the date of the acceptance, or more

frequently if circumstances warrant.

QUESTION CERTIFIED; SUBMISSION VACATED

and PROCEEDINGS STAYED.

_________________________

Sidney R. Thomas

Chief Judge

Ninth Circuit Court of Appeals