Seattle Enacts Law to Strengthen Wage Theft and Other Labor Standards Ordinances

Seattle Mayor Edward B. Murray recently signed a measure strengthening the city’s ability to enforce minimum wage and other workplace standards. The Wage Theft Prevention and Labor Standards Harmonization Ordinance 2015 harmonizes enforcement procedures, allows for a phased-in private cause of action, and provides key definitions of terms in the Minimum Wage, Administrative Wage Theft, Paid Sick and Safe Time, and Job Assistance ordinances.

In summary, the new ordinance makes the following important changes:

1. It provides a private cause of action for violations of the ordinances listed.
2. It increases penalties for violating the labor laws in question.
3. It decreases fines if the employer pays promptly.
4. It provides fines of $1,000 per employee for retaliation resulting from a complaint.
5. It allows employees to file anonymous complaints.
6. It allows the OLS to conduct proactive investigations.
7. It limits the city’s right to do business with violating businesses and allows for license denial or revocation.
8. It permits the OLS to help workers obtain U-Visas.
9. It provides $1 million in grants for education and technical assistance to inform workers of their rights.

Below is a description of the four laws that the new ordinance affects and a summary of the amendments to each.

I. Wage Theft Law

In April of 2015, the City of Seattle’s newly -created Office of Labor Standards (OLS was authorized to investigate workers’ complaints of “wage theft”—the nonpayment of wages and tips—pursuant to the city’s Wage Theft Ordinance. The Wage Theft Ordinance introduced additional notice requirements that went above and beyond those required under Washington state wage and hour laws. Under the Wage Theft Ordinance, at the time of hire employers must provide employees with written notice of information such as their rate of pay, tip and tip-sharing policies, pay basis (e.g., whether pay is calculated hourly, daily, weekly, by the shift, or by commission), and payday. Each payday, employers must provide written notice of the wages and tips employees received during the pay period. The ordinance contains two notable “rebuttable presumptions” that favor employees:

1. If an issue arises as to an employee’s entitlement to wage and tip compensation, and if the employer does not maintain or retain adequate payroll records (at least three years) or does not allow OLS reasonable access to those records, then a presumption, rebuttable only by “clear and convincing evidence,” arises that the employer violated the Wage Theft Ordinance.
2. If an employer takes an adverse action within 90 days of a covered employee’s “exercise of rights” under the Wage Theft Ordinance, then a rebuttable presumption arises that the adverse action was retaliation against the employee for engaging in protected activity. The ordinance defines “exercise of rights” to include the following:

• the right to make inquiries about rights protected under the ordinance;
• the right to file an oral or written complaint” about an alleged violation with the OLS;
• the right to inform an employer, union or similar organization, and/or legal counsel about an employer’s alleged violation;
• the right to cooperate with the OLS in its investigations;
• the right to oppose any policy, practice, or act that is unlawful under the ordinance; and
• the right to inform other employees of their potential rights under the ordinance.

The Wage Theft Law sets forth a three-year statute of limitations for employees to bring charges. Remedies include the alleged amount of unpaid wages and tips, any additional lost compensation accrued after the filing of the charge, and discretionary civil penalties for first time violators of up to $500 per aggrieved party. The ordinance provides that liabilities are binding on successor employers in the event a business is sold or transferred. Moreover, the Wage Theft Ordinance allows the City of Seattle to revoke or refuse to issue or renew the business license of an employer that does not promptly comply with a final order finding a wage theft violation. The administrative charge process does not replace the criminal complaint process for workers complaining of wage theft that the city authorized by ordinance in 2011.

II. Minimum Wage Law

Seattle’s new minimum wage law, Municipal Code 14.19, became effective in April of 2015 and will phase in wage increases over several years until the minimum wage rate reaches $15 per hour.

1. Small employers (which the law defines as businesses with fewer than 500 employees) will reach a $15 per hour minimum wage rate by 2019. The law also established a temporary guaranteed “minimum compensation responsibility” of $15 per hour, which employers must meet within the first five years by combining employer-paid health care contributions, consumer-paid tips, and employer-paid wages. The schedule for minimum compensation rates for small employers is as follows:

• $11 per hour, which became effective on April 1, 2015,
• $12 per hour, which became effective on January 1, 2016,
• $13 per hour by January 1, 2017,
• $14 per hour by January 1, 2018, and
• $15 per hour by January 1, 2019.

1. Large employers (which the law defines as businesses with 500 or more employees in the United States will reach $15 per hour in graduated stages over the course of the next three years:

• $11 per hour, which became effective on April 1, 2015,
• $13 per hour, which became effective on by January 1, 2016, and
• $15 per hour by January 1, 2017.

The wages of employees who receive health care benefits will reach $15 per hour in four years:

• $11 per hour, which became effective on by April 1, 2015,
• $12.50 per hour, which became effective on January 1, 2016,
• $13.50 per hour by January 1, 2017, and
• $15 per hour by January 1, 2018.

III. Paid Sick and Safe Time Law

Seattle’s Paid Sick and Safe Time Ordinance, Municipal Code 14.16), enacted in 2012, applies to employees working in Seattle who need to take time off from work for the following reasons:

• to deal with their own illness, injury, or health condition;
• to take care of a family member (including domestic partners) with an illness, injury or medical appointment;
• when the employer’s place of business has been closed by order of a public official for health reasons; or
• for reasons related to domestic violence, sexual assault, or stalking.

The ordinance applies to all employers with more than four full-time equivalent employees. All Seattle employees are eligible for the new benefit, including full time workers, part-time workers, and temporary workers. The rates at which employees accrue paid sick and safe time depend on whether the employer is “small” (4 to 49 employees), “medium” (49 to 249 employees), or “large” (250 or more employees).

IV. Job Assistance Ordinance

Seattle’s Job Assistance Ordinance, Municipal Code 14.17, enacted in 2013, restricts how employers can use conviction and arrest records during the hiring process and course of employment within city limits as follows:

• The law prohibits categorical exclusions in job ads. For example, the law prohibits employers from using language such as “Felons need not apply.”
• The law limits criminal history questions on job applications and criminal background checks until after an employer has conducted an initial screening to eliminate unqualified applicants.
• The law requires employers to have a legitimate business reason to deny a job based on a conviction record.
• The law requires employers to give applicants and employees an opportunity to explain or correct criminal history information.

The law contains additional responsibilities and certain exceptions, and does not apply to jobs involving unsupervised access to children under 16, individuals with developmental disabilities, or vulnerable adults.

V. Wage Theft Prevention and Labor Standards Harmonization Ordinance 2015

The new 2015 ordinance makes the following key changes to the above laws:

1. The ordinance provides workers with a private cause of action for alleged violations of the paid sick and safe time law, the minimum wage ordinance (which had not provided a private cause of action when enacted), and the wage theft law but delays implementation of the private cause of action as to PSST, Minimum Wage Ordinance, and Wage Theft Ordinance until April 1, 2016 for businesses with 50 or more employees and until April 1, 2017 for businesses with fewer than 50 employees.
2. The 2015 ordinance provides employees with  legal and equitable relief as well as up to three times unpaid wages or compensation —plus interest at 12 percent per annum—along with penalties of up to $5,000 to the aggrieved party for retaliation, attorneys’ fees, and costs.
3. The new law increased penalties for violations of the affected ordinances.
4. The ordinance strengthened civil penalties and fines for violations.
5. The 2015 ordinance clarifies the rebuttable presumption of unlawful retaliation to apply regarding adverse employment actions taken within 90 days of a protected activity and to require rebuttal by clear and convincing evidence. 
6. When the protected activity is a “motivating factor” (changed from “substantial factor”) in the adverse action a finding of unlawful retaliation is permitted. 
7. The ordinance provides relief in the form of reinstatement or up to 3 times the employee’s pay in front pay, a penalty to the aggrieved party of up to $5,000, and a fine to the agency of $1,000 per aggrieved party.
8. The ordinance provides employers with new incentives for prompt payment of fines and penalties by reduction the amounts owed when paid on a timely basis.
9. The OLS now has the ability to refer unpaid fine and penalty orders to collections or allow the city to file liens and garnish wages.
10. The Director of the Office of Labor Standards may request that the Finance and Administrative Services Departments refuse to issue, renew, or revoke a business license of an employer which has not paid a final order award in full. In addition, an employer subject to a final order shall not be permitted to bid on a city contract until the amount of the final order award is paid in full, and there is a two-year ban if an employer has two or more adverse final orders within five years.