WELA ALERT: Case Update

Cooper v. ALSCO,  — Wn.2d — , — P.3d —- (8/4/16)

Retail Sales Establishment Exemption from the Washington Minimum Wage Act is Broader than Analogous Federal Exemption

Alsco is a textile rental and sales company that supplies uniforms, linens, and other products to other businesses in industrial, hospitality, health care, and other fields. Alsco does not provide products or services for resale.  Alsco employees who deliver and pick up the goods can choose to be paid either by the hour or by commission with a base salary. For those who choose to be paid on commission, the commission portion comprises over half of their total pay. Alsco does not pay commissioned employees any greater compensation for hours they work over 40 in a week.

A class of commissioned delivery employees filed suit against Alsco, claiming entitlement to overtime pay under the Minimum Wage Act (MWA), chapter 49.46 RCW, and alleging Alsco willfully withheld wages in violation of the MWA.  Alsco argued that it is exempt from paying commissioned workers overtime because it is a Retail Sales Establishment (“RSE”) for purposes of the overtime exemption in RCW 49.46.130(3).  Alsco also claimed it had not willfully withheld wages because the commission-based wage system was negotiated as part of the CBA.

The trial court granted the employees’ motion regarding entitlement to overtime, finding that Alsco is not an RSE for purposes of the overtime exemption.  Discretionary review at the Court of Appeals was denied.  The trial court granted the employees’ motion for summary judgment on the method of calculating wages owed.  The court calculated the “regular rate of pay” for overtime purposes by dividing the total weekly compensation actually paid by 40 hours rather than all hours actually worked.  The Supreme Court granted review and reversed on the issue of whether Alsco was a Retail Service Establishment for the purpose of the overtime exemption.  The method of calculation was moot.

The Supreme Court relied upon statutory interpretation in a unanimous opinion by Justice Johnson.  RCW 49.46.010(6) defines an RSE as “an establishment seventy-five percent of whose annual dollar volume of sales or goods or services, is not for resale and is recognized as retail sales or services in the particular industry.” It is undisputed that the products sold by Alsco to other businesses are used by the businesses and are not resold to individuals. The dispositive question is whether it is “recognized as retail sales or services in the particular industry.”  Relying upon Stahl v. Delicor of Puget Sound, Inc., 148 Wn.2d 876, 64 P.3d 10 (2003), the Court held that it was.  The Court rejected federal regulations to the contrary because they do not directly control interpretation of the state MWA, and the Court could find “no language in the definition of an RSE under our act restricting the definition to businesses that sell to individuals.” The Court distinguished the federal cases cited by the employees.

Toby Marshall and Jeffrey Needle wrote an amicus brief for WELA.