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Are window washers exempt from overtime? They very well could be, the Seventh Circuit said in an opinion issued on April 1 (which is no joke, by the way).
Judge Richard Posner wrote for a unanimous three-judge panel in affirming a grant of summary judgment to window-cleaning company CCS against several current and former employees who claimed window washers didn't fall outside one of the exceptions to overtime in the Fair Labor Standards Act.
What a Strange Business Model
Under the FLSA, an hourly worker is exempt from overtime if the worker: (1) makes 1.5 times the minimum wage; (2) receives more than half his compensation in the form of commissions on goods or services; and (3) is employed by a "retail or service establishment."
CCS and the plaintiffs conceded that they already made 1.5 times the minimum wage. So are window washers paid on commission? And is window washing a "retail or service" business?
The window-washing wage model is unexpectedly opaque. CCS uses a "point" system to calculate the price it will charge for a given window-washing job. The points represent the difficulty of the job and the length of time to complete it. Workers on a job are paid a given rate, multiplied by the number of points for the job, as specified in the collective bargaining agreement. The agreement allows workers to be paid overtime, but the union has never enforced this provision.
The workers said this didn't amount to a "commission," where workers are paid by the completed sale. Rather, it's more like a "piece-rate" system, where an employee is paid by an item produced (e.g., a worker in a clothing factory gets paid per scarf knitted).
But Posner disagreed: piece-rate employees are paid even if no scarf is sold. On the other hand, window washers are paid only when a sale -- the sale of window-washing service -- is completed. Plus, like commissioned employees, window washers work irregular hours and during some months of the year, might not work at all. All this makes window washers more like commissioned employees.
Not a Wholesaler
Even so, they're exempt from overtime only if CCS satisfies the third element: being a retail or service establishment. It can't be retail -- because they don't sell goods -- but it can be a "service" establishment, as CCS sells the service of window washing. Posner actually split the difference, calling CCS a "retail service" establishment because it sells a service directly to end-users (building owners), meaning that CCS can't be a wholesaler.
The plaintiffs, however, characterized this as a wholesale relationship, claiming that "the building managers who buy CCS's cleaning services 'resell' them to the building's occupants, as if the managers were buying mops that they planned to resell to the occupants." If that doesn't make much sense to you, it didn't make much sense to Posner, either.
But before the court could dispose of this case, it had to address some procedural weirdness: After the appeal was argued, the parties stipulated to dismiss it pursuant to a settlement agreement. Normally, a court would sustain the agreement as a matter of course, but this court was concerned that all 24 plaintiffs received notice of the settlement -- and that the plaintiffs purported to agree to pay defendants' costs. "This, if true, means that the plaintiffs not only received nothing in exchange for abandoning their suit, but that they paid the defendant 'certain costs,'" Posner said.
The plaintiffs' lawyers apparently thought they'd do better re-litigating the same issue in a different case, but Posner called that "a type of strategic behavior that we do not encourage." Consequently, even as the Seventh Circuit affirmed the summary judgment for CCS, it dissolved the settlement, remaining "troubled, however, by the unexplained provision regarding compensation of some of the defendant's costs."