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# ~T.''{!.,,SJ._ CHIEF.ius·ncli'T'" Supreme Court Clerk 

### IN THE SUPREME COURT OF THE STATE OF WASHINGTON

DAVID COOPER and JERRY SCOTT, individually and on behalfofall those similarly situated, Respondents, 

### v. ALSCO, INC., a foreign corporation, Appellant. ) ) ) ) ) ) ) ) ) ) )



# _______________________) No. 91801-5

EnBanc

Filed 

### AUG 0 1 1 

### 2016 JOHNSON, J.-This case requires us to determine ifAlsco Inc. is a "retail
or service establishment" (RSE) under chapter 49.46 RCW for purposes ofan exemptionto the overtime payrequirement. 

### See RCW 49.46.010(6).The trial court grantedthe employees' motion for summaryjudgmentregarding entitlementto overtime pay, finding that Alsco is not an RSE for purposes ofthe overtime pay exception. In granting the employees' subsequent motion for summaryjudgment
onthe issue ofcalculating the amount ofovertime due, the court calculated the "regularrate ofpay" by dividing the total weekly compensation actually paid by 40 hours, notbyhours actually worked. We accepted direct review. We reverse the

### Cooper v. Alsea, Inc., No. 91801-5
trial court and hold that Alsco is an RSE for purposes ofthe overtime pay requirement. FACTS AND PROCEDURAL HISTORY Alsco is a textile rental and sales company that supplies uniforms, linens, and otherproducts to other businesses in industrial, hospitality, health care, and other fields. Alsco does notprovide products or services for resale. Alsco and its employees are covered by a collective bargaining agreement (CBA). 1 Alsco provides three services to its customers: (1) the rental and servicing of linens anduniforms, (2) the rental and servicing, including repair, replacement, and refilling, ofwashroom and hygiene products, and (3) the direct sale of janitorial products, garments, and linens. Its employees deliver clean goods, such as uniforms andtowels, to otherbusinesses andpickup soiled goods, whichAlsco takes backto its facilities for washing. Alsco sells some goods to businesses, such
as mops andpapertowels. Bothparties agree that Alsco does notprovide any goods for resale bytheir customers. Alsco employees who deliver andpick up the goods can choose to be paid either by the hour or by commission with a base salary. Forthose who choose to be

1No dispute exists that the employees received whatthe CBA provided. A CBA cannot evade Minimum Wage Act, chapter 49.46 RCW, requirements ifit applies. See Hisle v. Todd Pac. Shipyards Corp., 151 Wn.2d 853, 93 P.3d 108 (2004). 2

### Cooperv. Alsea, Inc., No. 91801-5 paid oncommission, the commission portion comprises over halfoftheirtotal pay. Alsco does notpay commissioned employees any greater compensation for hours they work over 40 in a week. A class ofcommissioned delivery employees filed suit against Alsco, claiming entitlementto overtime payunder the Minimum Wage Act (MWA), chapter 49.46 RCW, and alleging Alsco willfully withheld wages in violation of the MW A. Alsco andthe employees filed cross motions for summaryjudgment. Alsco arguedthat it is exempt from paying commissioned workers overtime because it is an RSE for purposes ofthe 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 ofthe CBA. Thetrial court grantedthe employees' motion regarding entitlement to overtime, finding thatAlsco is not an RSE for purposes ofthe overtime exemption. Inthe same order, the trial court grantedAlsco's motionthatthe alleged wrongful withholding ofovertime was not willfuF and also denied, withoutprejudice, the employees' motion as to the method for calculating unpaid overtime, leaving that issue for later.

2 The issue ofwillful withholding ofwages has not beenpursuedhere. 3

### Cooper v. Alsea, Inc., No. 91801-5 Next, the trial court certifiedthe questions regarding the applicability ofthe retail or service exemption and willful withholding ofwages to the Court of Appeals, which declined to grant discretionary review. The Court ofAppeals explained thatthe trial court could resolve the remaining issues relatively quickly and that immediate review would not materially advance the ultimate resolution of the litigation. The parties, back intrial court, filed cross motions onthe remaining issue ofhowto calculate the amount ofovertime owed to the employees by Alsco. The court granted the employees' motion and denied Alsco's. The court calculated the "regularrate ofpay" for overtime purposes by dividing the total weekly compensation actually paid by 40 hours rather than all hours actually worked. Alsco appealed directly to this court, arguing thatthere are conflicting decisions among the Court ofAppeals and a conflict with this court's decisions, and thatthis case involved a fundamental issue ofbroad public importance requiringprompt and ultimate determination. RAP 4.2(a)(4). We accepted direct
revrew. ANALYSIS The issue is one ofstatutory interpretation. We review statutory interpretation questions de novo. 

### State v. Azpitarte, 140 Wn.2d 138, 140-41, 995 P.2d 31 (2000). Unambiguous statutes are not subject tojudicial interpretation; we must determining the meaning ofthe statute based onthe statutory language. 4Cooper v. Alsea, Inc., No. 91801-5
Harmon v. Dep'tof Soc. & Health Servs., 134 Wn.2d 523, 530, 951 P.2d 770 (1998). Alsco contends that its commission-based-pay employees are exempt employees underthe "retail or service" exemptionunder the MW A. RCW 49.46.010(6). Washington's MWA generally requires employers to pay employees
one and one-halftimes their regularrate ofpay for any hours worked over 40 hours in a week. RCW49.46.130(1). 3 However, at issue here, the MWA expressly exempts employees who work for an RSE iftheir regular rate ofpay exceeds one and one-halftimes the minimum wage and more than halfofthe employee's compensation represents commissions on goods or services.4 The RSE exemption to the MWA states: No employer shall be deemed to have violated subsection (1) ofthis section by employing any employee ofa retail orservice establishment for a workweek in excess ofthe applicable workweek specified in subsection 

### (1) ofthis section if: (a) The regular rate ofpay ofthe employee is in excess ofone and one-halftimes the minimum hourly rate required under RCW 49.46.020; and

3"Except as otherwise provided inthis section, no employer shall employ any ofhis or her employees for a workweek longerthan forty hours unless such employee receives compensationfor his orher employment in excess ofthe hours above specified at a rate not less than one and one-halftimes the regular rate at whichhe or she is employed." 4 The statute does not differentiate between sales ofservices or goods. We similarlymake no effortto distinguish Alsco's transactions that are sales ofgoods from those which are sales of servwes. 5

### Cooper v. Alsea, Inc., No. 91801-5 (b) More than halfofthe employee's compensation for a representative period, ofnot less than one month, represents commissions on goods or services. RCW 49.46.130(3) (emphasis added). Itis uncontested thatthe commissionbased-pay employees here are paid over one and a halftimes the minimum wage and that commissions make up overhalfoftheirpay. The issue then is whether Alsco is an RSE underthe statute. RCW 49.46.010(6) defines an RSE as "an establishment seventy-five percent ofwhose annual dollar volume ofsales or goods or services, is not for resale and is recognized as retail sales or services inthe particular industry." Itis undisputed that the products sold by Alsco to otherbusinesses 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." The trial court reasoned that Alsea's sales are not recognized as retail sales
or services inthe particular industry because they are to otherbusinesses pursuant to longterm contracts and because Alsco lacks a retail concept. The trial court explainedthat Alsea's customers may be "the end ofthe line" in the sense thatthe customer's employees wear the uniforms, butthey do so only as a means to assist their own employers intheir efforts to make a profit by selling their own goods or services to the general public. In essence, the trial court seemingly determined

6

### Cooperv. Alsea, Inc., No. 91801-5
Alsco is not an RSE because it contracts with other businesses on a long term basis. That reasoning misreads the statute. While there is little guiding Washington precedent on whether a business meets the definition ofan RSE, we considered whether a vending machine business was an RSE in 

### Stahl v. Delicor of Puget Sound, Inc., 148 Wn.2d 876, 64 P.3d 10 (2003). Alsco primarily asserts the trial court's determination that Alsco is not an RSE conflicts with our decision in 

### Stahl. Inthat case, we addressed whether sales ofgoods and services are recognized as retail inthe particular industry. In 

### Stahl, 95 percent ofthe employer's revenue came from direct sales to consumers, but the question remained whether sales from vending machines were "recognized inthe industry" as retail sales. 

### Stahl, 148 Wn.2d at 882. We held that vending machine sales are recognized as retail sales by the industry, observing that vending machine sales are subject to the retail sales tax and are "end ofthe line" transactions betweenthe vending company andthe ultimate consumer. 

### Stahl, 148 Wn.2d at 882. The factors discussed in 

### Stahl are helpful inthe situation present here. First, Alsco's sales are taxedunder Washington's retail sales tax under RCW 82.08.0202, whichprovides: [P]roviding customers with a supply ofclean linen, towels, uniforms, gowns, protective apparel, clean room apparel, mats, rugs, and similar items, whether ownership ofthe item is inthe person operating the
7

### Cooper v. Alsea, Inc., No. 91801-5
linen and uniform supply service or in the customer [is a retail sale and subject to retail sales tax]. This taxtreatment factors heavily in deciding the applicability oftheRSE exemption. Itmakes sense that ifthe businesstransactions are taxed as being retail, thenthe business is, in fact, engaged in retail sales under the exemption. Second, Alsco's sales are "end ofthe line" sales. None ofAlsco's goods or services are resold. This also weighs heavily in the RSE determination. These factors are those
onwhich

### Stahl focused. The distinction between the present case and 

### Stahl is that here, Alsco's customers are otherbusinesses, whichthe trial court focused oninits conclusion thatAlsco was not anRSE because its business customers used Alsco's products and services "as a means to assist their own ... efforts to make a profit by selling their own goods or services to the general public." Clerk's Papers at 803. But such
. a distinction is notfound in RCW 82.08.0202. Manybusinesses sell products to otherbusinesses atretail. That Alsco's sales are predominately high volume does not control whetherthose sales are retail. A business can sell services at large volume and still be consideredretail. Highvolume sales do notnegate the definition of"retail." While Alsco's "products" do not fit into the category ofwhat one intuitively considers retail, the statutory language controls. Alsco provides its customers three

8

### Cooper v. Alsea, Inc., No. 91801-5
services: (1) the rental and servicing oflinens and uniforms, (2) the rental and servicing ofwashroom and hygiene products, and (3) the direct sale of janitorial products, garments, and linens. These "products" are providing goods 

### andservices. The statute applies to both goods and services. The statutory definition of"retail" undercuts the intuitive sense ofwhat is retail. Butwe are analyzing those statutory definitions. Retail businesses are not limitedto establishments where consumers enter, take goods offshelves, and purchase at a register. Retail businesses are also entities that sell "goods and services." The service here that Alsco provides includes supplyinguniforms, towels, and linens thatthe customer purchases or rents from Alsco. The core ofAlsea's business is selling a "service" inthe statutory sense, specifically the rental oflinens and garments. The laundering of the product by Alsco couldbe performed by another company orthe customer themselves. Here, the essence ofthe transaction subject to the sales tax is the providing ofthe clean linens and unifonus. RCW 82.08.0202 includes "providing customers with a supply ofclean linens, towels, uniforms,
... and similar items, whether ownership ofthe item is inthe person operatingthe linen anduniform supply service orin the customer" as a retail sale and subject to retail sales tax. Simplifying the transaction in analyzing RCW 82.08.0202 is somewhat helpful. Where a business rents uniforms to a customer for an event, RCW 82.08.0202 provides thatthis is a retail transaction. Where the customer is another 9Cooper v. Alsea, Inc., No. 91801-5 business, the transaction retains its retail treatment. The statute draws no distinction between individual versus business customers. The laundering and return ofuniforms to the customer, under RCW 82.08.0202, is similarly designated
a retail transaction. The statutory characterization is not affected or limited based
onthe duration ofthe relationship, the volume ofbusiness, orthe fact that businesses are involved. UnderRCW 82.08.0202, no language exists supporting the trial court's conclusion. Alsco identifies a similar federal case that interprets the FairLabor Standards Act of 1938 (FLSA), 29 U.S.C. §§ 201-219, as exempting business-tobusiness sales ofgoods or services as retail sales as long as the receiving business is the ultimate user. 5 InAlvarado v. Corporate Cleaning Services, Inc., 782 F.3d 365 (7th Cir. 2015), where employees ofa windowwashing business sued their employer, seeking overtime pay allegedly due to them underthe FLSA, the court held thatthebusiness met the RSE requirementbecause it sold its window cleaning services to the ultimate customers, even though most oftheir customers were other businesses, namely building owners and managers. Particularly instructive here, the court inAlvarado rejected the argumentthatthe window washing companies'

5 Because the MW A is patterned on the FLSA, we will oftenturn to federal authority interpreting the FLSA for guidance. See Hisle, 151 Wn.2d at 862 n.6 (recognizing that the FLSA is persuasive authority becausethe MWA is based onthe FLSA). 10

### Cooper v. Alsea, Inc., No. 91801-5
services were not retail because other business usedthe services to make a profit, explaining: It would be absurd to suggest that a dealer in motor vehicles, when it sells a truck to a moving company, is "wholesaling" the truck because the buyer will doubtless try to recover the cost ofthe purchase in the price he charges for his moving services, which utilize the truck. 

### Alvarado, 782 F.3d at 369. This case and the factors analyzed in

### Stahl supportthe determination that Alsco is an RSE. The employees argue that Alsco is not an RSE because most ofits business involves longterm contracts and high-volume sales. They cite federal regulations implementing the FLSAthatprovide an RSE is one thattypically "sells goods or services to the general public
... in small quantities" andthatgenerally "will not be considered a retail or service establishment
... ifit is not ordinarily available to the general consuming public." 29 C.P.R. §§ 779.318(a), § 779.319. However, those same regulations also provide that the retail exemption is intendedto "extend in some measure beyond consumer goods and services to embrace certain products almost neverpurchased for family ornoncommercial use." 29 C.P.R. § 779.318(b). Further, federal courts have recognizedthat "'[d]espite this reference to supplying goods and services to the general public,
...the provision ofgoods and services to commercial customers does not necessarilyprevent an establishment from qualifying as a retail or service establishment."' 

### Charlot v. Ecolab, Inc., 136 F.

11Cooper v. Alsea, Inc., No. 91801-5 Supp. 3d 433 (E.D.N.Y. 2015) (first alteration in original) (quoting Kelly v. AI Tech., No. 09 Civ. 962(LAK)(MHD), 2010 WL 1541585, at* 12 (S.D.N.Y. Apr. 12, 2010) (court order) (holding thatthe supplier ofcleaning and related equipment to restaurants, hotels, and otherbusinesses maybe an RSE for purposes of commission-based-pay employee exemption under FLSA)). Importantly, the federal regulations cited by the employees do not directly control interpretation ofour state's MWA, and we find no language inthe definition ofan RSE under our act restricting the definition to businesses that sell to individuals. Like the MW A, the FLSA requires overtime pay ofone and onehalftimes the regularrate for every hour workedbeyond 40. 29 U.S.C. 

### § 207(a)(l). Alsco correctly points outthat the FLSAdoes not require that a business sell to individuals to qualify as an RSE. And, Congress amended the FLSA in 1949 to specifically allow business-to-business sales to qualify as retail sales. Afterthe 1949 amendments, the definition of"retail sales" was broadened to include sales to customers who are businesses in addition to individuals. Ch. 736, § 3, 63 Stat. 911; seeSchultz v. Crotty Bros. Texas, 310 F. Supp. 761,766 (B.D. Tex. 1970) ("There can be no question that [the 1949] amendments have broadened the scope ofthe§ 13(a) (2) exemption."). Congress replacedthe previous "consumer use" test when it amended the FLSA in 1949 to allow employers who sell goods

12Cooper v. Alsea, Inc., No. 91801-5
and services to otherbusinesses to qualify for the retail sales exemption. Ch. 736, 

### § 3, 63 Stat. 911. Since then, federal courts have held thatthe retail sales or service establishment exemption underthe FLSA applies to employers engaged in business-to-business sales even where the business engages in those types ofsales exclusively. InIdaho SheetMetal Works, Inc. v. Wirtz, 383 U.S. 190, 86 S. Ct. 737 15 L. Ed. 2d 694 (1966), the Court held that a tire merchant was not an RSE on the basis that it soldtires at discount prices to businesses for use ontheirvehicle fleets. The employees draw a comparison between Alsea's large volume contracts andthe equipment sold inIdaho SheetMetal. However, thedecision inIdaho SheetMetal
was guided not by the volume ofsales in question, but by the secretary oflabor's rule specifying that sales to fleets offive or more vehicles at wholesale prices are not retail sales. Idaho SheetMetal, 383 U.S. at 208. TheIdaho SheetMetal opinion notedthat the secretary'srule was intendedto further specific legislative intentto exclude certaintypes ofsales made at deep discounts and in quantity. SeeIdaho SheetMetal, 383 U.S. at 192-93. In this state, no similar rule excluding businesses that sell in quantity from the RSE definition underthe MW A exists. Idaho Sheet Metal is notthat helpful because that case involved a former version ofthe FLSA, under which all retail employees were exempt from overtime pay requirements, not justthose paid on commission.
13

### Cooper v. Alsea, Inc., No. 91801-5
Additional federal cases support Alsco's position. 

### English v. Ecolab, Inc., No. 06 Civ. 5672,2008 WL 878456 (S.D.N.Y. Mar. 31, 2008) (court order), held that sales to otherbusinesses pursuantto long term contracts-inthat case, pest extermination services-were retail sales. The employees attempt to distinguish this case by pointing to the facts thatthe exterminators were free to set their own schedules, which would allow them to "game" the overtime system, and thatthey
were skilled workers, so the company could nothire more workers to avoid overtime. However, whether the employees do or do not control their schedules is nothelpful in deciding whetherthe exemption applies. As we discussed in 

### Stahl,
an employee'sjob duties do not affect whetherhe or she is paid a bona fide commission for purposes ofthe retail service exemption. An employee who has no involvement in sales is exempt from overtime as long as the employee's commission is tied to the amount charged to the customer andthe remaining requirements ofthe exemption are met. 

### Stahl, 148 Wn.2d at 886-87. The employees point outthatthe businesses in

### English thatpurchase the pest extermination services primarily benefit from those services, as opposedtothe individuals who patronage the ostensibly pest-free businesses. Butthe employees cite no authority thatthe RSE determination turns on who receives the benefit. As Alsco points out, such a definition would mean that a business-to-business sale

14

### Cooperv. Alsea, Inc., No. 91801-5
could never be retail, which, as explained above, is contrary to both federal and Washington law. In an attemptto further distinguish the present case from 

### English, the employees cite to another federal case. 

### Cancilla v. Ecolab, Inc., No. C 12-03001 CRB, 2013 WL 1365939 (N.D. Cal. Apr. 3, 2013) (court order) (denying Ecolab's summaryjudgmentmotion asserting the RSE; Ecolab eventually settled following certification ofan FLSA collective action). The facts in 

### Cancilla are distinguishable from the present case. Unlike the service technicians involved in that case, who hadno way to increase their compensation, the employees here can and do sell more products to increase their commission-basedpay. Lastly, the employees rely on four federal cases in support oftheir argument thatAlsco's sales shouldnot be recognized as retail because Alsco limits its operationto long term volume rental to commercial customers. Resp'ts/Pls.' Resp. to AppellantAlsco Inc.'s Opening Br. at 13; 

### seeIdaho SheetMetal, 383 U.S. at 206; 

### Martino v. Mich. Window Cleaning Co., 327 U.S. 173, 66 S. Ct. 379,90 L. Ed. 603 (1946); 

### Schultz v. InstantHandling, Inc., 418 F.2d 1019 (5th Cir. 1969); 

### Acme Car & TruckRentals, Inc. v. Hooper, 331 F.2d 442, 447-48 (5th Cir. 1964). All four ofthese cases rely on a definition ofan RSE under a section ofthe FLSA that was repealed in 1989. Pub. L. No. 101-157, 103 Stat. 939. Underthe previous section 213(a)(2) ofthe FLSA, RSE was defined to include those employers who 15

### Cooperv. Alsea, Inc., No. 91801-5 operated only on a small scale in the local community, so-called "mom and pop" businesses. Section 213(a)(2) did notrequire that employees be paid on a commission basis because that section was not concernedwith the exempt status of employees paid on a commission, unlike the exemption at issue here. Significantly, Congress repealed section 213(a)(2) in 1989. Pub. L. No. 101-157, 103 Stat. 939. Federal courts in those previous cases necessarily found thatthe businesses were not RSEs because the definition ofan RSE was much narrower. Since this provision was repealed, these cases are not helpful. High volume sales no longer control; a business now can sell a larger or smaller quantity ofgoods and services, which does not negate the definition of"retail." Underthe statute, the exemption extends to businesses where its customers
are otherbusinesses, as long as its sales are not for resale and are recognized inthe industry as retail-in other words, as long its sales are subjectto the retail sales tax, its sales are "end ofthe line" transactions, and the goods and services being sold are not for resale.6 Alsco meets these requirements. We reverse andremand

6The statute is limited by its own terms; the RSE exemption applies only ifthe employer is an RSE andthe employees' regular rate ofpay exceeds one and one-halftimes the minimum wage, and morethan halfofthe employees' compensation represents commissions on goods or services. Any concern about an ostensibly broad definition ofan RSE is tempered by the other wage-based statutoryrequirements to the exemption. 16

### Cooperv. Alsea, Inc., No. 91801-5
for entry of judgment for Alsco. 7

WE CONCUR:

7 Because we hold that Alsea is an RSE and therefore its employees are not entitled to overtime pay, we need not address whether the trial court erred in detem1ining the formula for calculating the overtime rate.
17