Wage and Hour Stakes Raised in Seattle

Effective April 1, 2015, Seattle employers need to ensure compliance with two significant new ordinances. First, Seattle’s minimum wage has been raised to $10-$11 per hour, depending on employer size. Second, failure to properly pay wages, comply with new recordkeeping and notice rules, or any alleged retaliation against employees can expose employers to significant liability for “wage theft.”

The Road to a $15 Minimum Wage

Despite Washington already having the highest state minimum wage in the nation ($9.47 per hour), the City of Seattle has started down a path that will gradually raise its minimum wage to $15 per hour for virtually all non-exempt employees working within its borders. The road to $15 varies based on the size of the business.

Large Employers

Effective April 1, 2015, employers with at least 501 employees (anywhere in the country, not just in Seattle) must ensure that virtually all non-exempt Seattle employees are paid at least $11 per hour. Notably, this includes franchisees that, regardless of their size, are associated with a franchise or network of franchises that employ more than 500 employees. Unfortunately, a federal court has already rejected a challenge by small franchisees seeking to avoid being grouped with large employers.

The minimum wage will steadily increase each January 1 until it reaches the target of $15. Large employers will reach the $15 target on January 1, 2017, or January 1, 2018, for employers that contribute towards a health care plan equivalent or better than the “Silver” level under the Affordable Care Act (ACA).

Small Employers

Effective April 1, 2015, businesses with 500 or fewer employees must pay a minimum wage of at least $10 per hour to non-exempt employees, and “minimum compensation” of at least $11 per hour. Under the ordinance, “minimum compensation” is the total of an employee’s wages, tips, and employer contributions to a health care plan equivalent or better than the ACA’s Silver level.

Minimum wage and minimum compensation levels will continue to increase annually, hitting a $15 minimum compensation level effective January 1, 2021 (as opposed to the $15 minimum wage for larger employers). Finally, effective January 1, 2025, the minimum compensation concept will disappear, and employers of all sizes will be subject to the same minimum wage requirements.

Notice and Posting Requirements

The new minimum wage ordinance also requires all Seattle employers to post a notice in a conspicuous place at any workplace or job site where covered employees work. The notice must be written in any language commonly spoken by employees at work. Copies of the posters in English and Spanish can be located here.

Enforcement

The new Seattle minimum wage ordinance will be enforced by the newly created Office of Labor Standards (OLS) within the Seattle Office for Civil Rights. Although OLS will immediately begin pursuing claims for unpaid wages, the agency has publicly stated that, absent egregious violations, it does not intend to impose additional civil penalties during the first year the ordinance is effective. Beginning April 1, 2016, however, OLS is authorized to impose civil penalties ranging from $125 for first violations, up to $20,000 per employee after three violations.

Seattle’s New “Wage Theft” Ordinance

Following a growing national trend, Seattle enacted a “wage theft” ordinance that went into effect on April 1, 2015, and that amends the City’s 2011 ordinance criminalizing so-called wage theft. In addition to mandating that employers properly pay their employees on an established payday, the ordinance creates new notice and posting requirements, and allows for potential civil penalties for retaliation against any employee for exercising their rights under the ordinance.

Notice and Posting Requirements

At the time of hire, Seattle employees must be provided written notice of the employer’s name, main office address and phone number, pay rate, tip policy, pay basis, and established payday. In addition, each time wages and tips are paid, the business must provide the employee written notice of the rate(s) of pay, tip compensation, pay basis (e.g., hourly, daily, shift, etc.), gross wages, and all deductions for the pay period. This information can be provided via paystub or any other reasonable method.

Employers must also provide written notice to employees about their rights under the ordinance, including their right to file an administrative charge if they believe the company has violated the ordinance. This notice requirement can be satisfied by posting a City-created poster within each workplace, or by distributing the notice to each new employee, inserting the notice into a handbook, copying the notice into a letter, or posting the notice on a company intranet.

Records related to all notice and posting requirements must be maintained for at least three years.

Employers May Be Legally Presumed to Have Violated the Ordinance

Increasing the risk of doing business in Seattle, the ordinance can place the burden on employers to prove they did not violate it, rather than placing the burden on employees or the City to prove an employer’s violation.

First, if an employee files a complaint under the ordinance related to wages or tips, and the employer has not maintained required payroll records or denies the City access to the records, the ordinance creates a “rebuttable presumption” that the employer violated the ordinance. That presumption can only be overcome if the employer presents “clear and convincing” evidence that it did not violate the ordinance. This risk heightens the importance of maintaining payroll records for at least three years.

Second, if an employer takes any adverse action against an employee within 90 days of the employee’s “exercise of rights” under the ordinance, a rebuttable presumption arises that the employer unlawfully retaliated against the employee. Again, that presumption shifts the burden to the employer to prove that it did not retaliate against the employee.

Notably, the ordinance includes a nonexhaustive and exceptionally broad definition of “exercise of rights” that includes: (1) making any inquiry about rights protected under the ordinance; (2) filing an oral or written complaint with the City; (3) informing an employer, union, or legal counsel about an alleged violation of the ordinance; (4) cooperating with a City investigation of alleged violations; (5) “oppos[ing]” any policy, practice, or act that violates the ordinance; and (6) informing other employees of their potential rights under the ordinance. Because of this broad definition, virtually any employee activity related to the ordinance creates “a rebuttable presumption of retaliation if an employer takes an adverse action against a person within 90 days of the person’s exercise of rights.”

Enforcement

Similar to the enforcement of the minimum wage ordinance, OLS will investigate and enforce the wage theft ordinance. The ordinance creates a three-year statute of limitations for employees to file administrative charges related to unpaid wages, improper notices, and alleged retaliation. In addition to liability for unpaid wages and tips plus interest, OLS is authorized to impose civil penalties of up to $20,000 per employee, and even revocation of a business license.