Enforcing Seattle’s Minimum Wage Law

Published April 28th, 2016 -  - 04.28.1611


April 1st marked the one-year anniversary of the effective date of Seattle’s headline-making minimum wage law.  The law mandated a graduated increase to $15/hour by 2018 for employers with more than 500 employees and 2021 for all employers with less.  New York, Los Angeles, San Francisco and Washington, D.C. have followed with their own variations.  Communities around the nation have recognized the need for more stringent local labor laws and raise living standards in the wake of federal inactivity.  Seattle has been on the forefront of this movement, with the minimum wage law following the enactment in 2011 of legislation guaranteeing paid sick and safe time and criminalizing wage theft.

The public debate thus far has focused whether the wage increase has cost jobs and what it would mean for other cities if and when they enact similar legislation.  But also of importance is the question of what the city has done – and where it has fallen short – to enforce its progressive labor laws.

Enforcement Reform Suffered a Rocky Start

Seattle labor advocates have tried for years to call attention to the gap between the standards set by law and the lived experience of low-wage workers.  In 2014, the University of Washington published an evaluation study on the city’s paid sick and safe time ordinance.  Results showed only 61 percent of all employers surveyed – and only 30 perfect of large employers, those with 250 or more employees – covered part-time and full-time workers as required.  Another 2014 study conducted by Seattle’s auditor found that investigations into the paid leave law were defined by a non-adversarial, reactive approach; in 70 percent of cases reviewed, there was no evidence that businesses changed their policies.  To further emphasize these failures, the study confirmed a Seattle Times investigation showing that in the three years following the criminalization of wage theft, not a single employer had been prosecuted.  Evidence from around the country suggests there is little reason to believe the minimum wage raise will be more broadly adopted without more effective enforcement.

The City Council seemed to recognize this reality.  Along with raising the minimum wage in 2014, it created a new division of the Office for Civil Rights, the Office of Labor Standards (OLS), one of the few municipal enforcement offices in the nation.  OLS has a $1.3 million budget and employs seven people to cover a workforce of 500,000: four investigators, an analyst, a community liaison and a director.  And though one inspector for every 125,000 workers does not sound like much, a National Labor Employment Project (NELP) study shows it represents a significant improvement over the federal Department of Labor’s capacity of one investigator for every 171,744 workers and Washington state’s one for every 157,337 workers.

While the idea deserves praise, the city’s handling of the inception of OLS was emblematic of the often inattentive approach given to enforcement.  The first minimum wage increase took effect on April 1, 2015, but the city did not hire a director for OLS until June.  And instead of using the opportunity to strengthen relationships between his office and local labor leaders, the Mayor, Ed Murray, opted against appointing one of the four candidates suggested by stakeholders as director.  OLS has faced more substantive issues as well.  First and foremost, the office relied exclusively on worker complaints to start investigations.  And when it did investigate worker claims, OLS was not very effective in recovering for employees.  In its 184 investigations in 2015 of paid sick time and wage theft (including noncompliance with the city’s new minimum wage), OLS managed to recover just 19 percent of the assessed employee remedies and civil penalties.

Comprehensive Legislation Gives OLS Power

Despite its early deficiencies, the very existence of OLS is a strong step in the right direction.  And perhaps because of its perceived ineffectiveness, the City Council closed its 2015 session by enacting a sweeping 177-page bill designed to finally give teeth to the laws on the books.  The law embodies almost all of the suggestions made by NELP for improving labor standards at the local level.  It creates a private right of action for employees, giving them the right to sue over violations of the city’s minimum wage, wage theft, and paid sick leave laws.  This will likely be the most significant change, even though it represents the correction of an initial oversight as opposed to a step forward relative to other cities.  It also grants OLS the authority to proactively investigate businesses, without waiting for employee complaints, an approach endorsed for years by various labor activists and the DOL.  The preexisting complaint-based system was problematic because the employees most in need of protection are most susceptible to retaliation.  OLS can now use its authority to independently investigate businesses in industries well known for labor violations.

In addition to those broad changes, the law tweaks and improves on enforcement particulars that should strengthen the overall labor law scheme.  It standardizes employer penalties for labor law violations, which in many cases will result in increased fines.  The first penalty for violating the paid sick leave, wage-theft, or minimum wage laws will be $500 for each affected worker, $1000 for the second violation, and $5000 for the third.  Notably, OLS will have the discretion to require employers to pay each worker three time what she is owed on the first violation, damages that become mandatory for repeat violations.  Fines will decrease or even be waived if the employer pays employees what they are owed within 10 days, incentivizing employers to reconcile quickly.  The new law also prohibits companies who have not paid back wages or fines from bidding on city contracts.

A Traditional Enforcement Regime May Get Creative Funding

Labor advocates cannot criticize the substance of the city’s enforcement bill.  The broad authority granted to OLS and fee structure for violations should undoubtedly have positive effects.  But for a city so keen on innovation, the bill might seem a bit old-fashioned.  Luckily for those who expect more imagination, SEIU 775 has been lobbying city lawmakers to enact a new tax on employers that will charge $0.01 per hour worked for each employee of businesses in the city.  The new revenue will be used to fund education about labor laws and as additional backing for OLS.  SEIU has also filed paperwork to introduce a ballot initiative in November to take the issue directly to voters, a move that may further incentivize lawmakers to act quickly.  Passage of the new tax through either channel would again put Seattle on the forefront of the labor movement.

Conclusion

The Seattle experience demonstrates the potential of local labor reform efforts.  In progressive locales, legislators have leeway to take up workers rights legislation and move fast where the public is supportive; Seattle was able to both significantly raise its minimum wage and radically transform its enforcement regime within a year, and may see the implementation of a creative funding structure in the next one.

 

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