Understanding Seattle’s Minimum Wageby Michelle Bomberger | June 24, 2014
Blog written by Keil Larsen, Equinox Business Law Group.
On June 2, 2014, the Seattle City Council unanimously approved the adoption of a $15 per hour minimum wage ordinance. The ordinance will affect employers beginning April 1, 2015 and will phase-in wage increases to the minimum wage of employees to $15.00 per hour over 3-7 years depending on the size of the employer.
Currently the Washington State minimum wage is $9.32 per hour and the federal minimum wage is $7.25/ hour. Washington has the highest minimum wage in the nation with Oregon in second place at $9.10/hour and Vermont in third place at $8.73/hour.
The new Seattle Minimum Wage will affect any worker who works more than two hours in a two week period within the city limits of Seattle. Travel through Seattle is not included in this calculation.
Businesses are affected differently based on the number of employees that they have, even if those employees are not working in Seattle. The ordinance defines small businesses as those with 500 or fewer employees and large businesses as those with more than 500 employees, either locally or nationally and including franchises. There are no industries, organizations or classes of employers that are exempt from any provision of the ordinance unless otherwise specifically excluded under state and federal law.
The minimum wage paid to an employee may include any commissions or bonuses earned as long as the total amount of compensation earned during a single work week does not result in less than the applicable minimum wage.
Large employers must pay their employees a minimum wage of $15/hour by 2017, however, large employers who make payments towards an individual employee’s medical benefits plan are subject to a reduced phase-in period and have until 2018 to pay their employees a minimum wage of $15/hour.
Small employers will have until 2019 to reach the $15/hour threshold if their employees do not receive health coverage or tips. If a small employer’s employees receive either tips or health coverage, the employer will have until 2021 to reach the $15/hour minimum wage for their affected employees.
By 2025, employees from any sized employers will be earning an estimated $18.13 per hour in Seattle compared to an estimated $12.08 per hour elsewhere in Washington. The phase-in of the law will begin in 2015 with the Seattle minimum wage jumping to $11.00 per hour for all classes of employer except for small employers with employees who receive either tips or healthcare, which will start out at $10.00 per hour. Annual increases in the respective minimum wages will be in amounts described in the following table:
|WA State Minimum Wage*||Large Employers||Larger Employers w/ Healthcare||Small Employers||Small Employers w/ Tips or Healthcare|
* 2.40% CPI estimated for WA State Minimum Wage and after Seattle Minimum Wage reaches $15.00.
Notice Requirement. Employers will be required to give notice of the Seattle wage laws in English, Spanish and any other language commonly spoken by employees at the particular workplace. The notice must provide (1) that the employees are entitled to the minimum wage and minimum compensation, (2) that retaliation against employees who exercise their rights is prohibited and (3) that each employee has the right to file a charge or bring a civil claim to enforce their rights. Employers will be required to maintain payroll records pertaining to covered employees for a period of three years.
Penalties for non-compliance with the law are as follows:
- Willful failure to violate the notice requirement will result in a penalty in the amount of $125.00 for the first violation and $250 for each subsequent violation.
- Failure to properly pay employees minimum wage and minimum compensation will result in an initial penalty of $500. A second violation will result in a penalty equal to either $1,000 per employee or an amount equal to 10% of the total amount of unpaid wages, whichever is higher. A third violation will result in a penalty equal to either $5,000 per employee or an amount equal to 10% of the total amount of unpaid wages, whichever is higher. The maximum penalty for a violation of this ordinance will be $20,000 per employee.
It is estimated that over the next seven years, a minimum wage worker in Seattle will earn at least $4/ hour more than workers elsewhere in Washington and, based on a 30 hour work week, will earn over $6,200 more per year than any other Washington state minimum wage worker.
Of course this matter is not settled. An organization named 15 Now is working to place an initiative on the ballot for the fall election to shorten the phase-in period to a three year period for all businesses, regardless of size, and to prohibit businesses from counting tips, commission, bonuses or benefits in calculating the employees’ minimum wage. On the other side of the argument, a group named OneSeattle Coalition was formed to oppose the initiative backed by 15 Now and instead wants to (1) increase the phase-in period to 8 years, (2) implement permanent credit for tips, commissions and other benefits (which under the current law end after 2019) and (3) to allow for a lower, temporary training wage. Most recently, on June 11, 2014, a group of Seattle franchise owners filed suit in the U.S. District Court to seek to stop the city from moving forward with the current ordinance because the business owners argue that the law unfairly treats them as large business owners though each is an independently owned franchise and is operated as a small business.
Please contact Equinox Business Law Group if you have any questions regarding this new law or how it might affect your business or your employees.