MAPC Lawyers Publish “Mutual Wage Agreements Upheld Despite DLSE Interpretation to the Contrary”

By Joshua R. Dale

The Second District Court of Appeal (Los Angeles) upheld a defense judgment for an employer who paid a non-exempt janitorial employee a fixed weekly salary based upon a mutual wage agreement.  Plaintiff’s pay was fixed based upon an agreed to amount of regular hours worked and a predetermined amount of overtime. 

Plaintiff argued that the fixed rate of $880 per week for both regular pay and overtime violated Labor Code section 515, enacted in 2000.  Plaintiff contended that Section 515 outlawed agreements which combined regular rate and overtime rate pay for hourly wage employees into a single lump sum weekly payment, commonly known as mutual wage agreements.  Plaintiff based his argument, in part, on the Department of Labor Standards Enforcement’s Enforcement Policies and Interpretations Manual, which interprets Section 515 as outlawing mutual wage agreements. 


The appellate court refused to give deference to the DLSE’s manual, and found that there was no case law supporting that Section 515 outlawed mutual wage agreements.  The court further found plenty of evidence that plaintiff was aware of and understood that his weekly pay was based upon a combination of agreed-to regular work and overtime work.


While the court’s decision should be encouraging to employers who use non-exempt employees in jobs that necessitate overtime hours being worked each week, mutual wage agreements are a potential minefield, that if used, need to be carefully crafted.  Here, plaintiff made numerous arguments as to why he didn’t understand the nature of the agreement, which arguments failed due to a great deal of testimonial evidence that plaintiff understood the agreement completely.  Most employers may not be so lucky.

Arechiga v. Dolores Press, Inc.  (2d Dist., February 7, 2011) Case No. B218171