$15 Minimum Wage

Mayor Murray signs minimum wage legislation into law

A growing number of cities, including Seattle, are examining the costs and benefits of implementing citywide minimum wage laws. Citywide minimum wage laws offer local governments a powerful tool for helping low-income workers and families in their communities. Such measures also have significant impact on businesses and how they operate.

Shortly after taking office, Mayor Murray formed the Income Inequality Advisory Committee (IIAC) to address a cornerstone priority of an opportunity agenda: a meaningful increase in the compensation for Seattle workers. The committee, which represented broad and diverse perspectives, was charged with delivering an actionable set of recommendations for increasing the minimum wage within the city of Seattle.

On May 1, 2014, Mayor Murray announced that the committee — comprised of representatives from labor, business, and non-profits — had reached agreement on those recommendations. The Mayor’s resulting proposal is now being reviewed by the City Council’s Select Committee on the Minimum Wage and Income Inequality.

PASSED LEGISLATION

The new minimum wage legislation passed by Seattle City Council and signed into law by Mayor Murray provides for an increase in the minimum wage in the City of Seattle to $15 an hour, phased in over time, beginning April 2015:

  • Small employers (businesses with fewer than 500 employees) will reach a $15 an hour minimum wage in seven years. Also established is a temporary guaranteed minimum compensation responsibility of $15 an hour to be met within the first five years, which can be achived by combining employer-paid health care contributions, consumer-paid tips, and employer-paid wages.
  • Large employers (businesses with 500 or more employees, either in Seattle or nationally) will reach $15 per hour in three years. The wages of employees who receive health care benefits will reach $15 per hour in four years.

Schedule 1 employers (more than 500 employees in the U.S.)

Schedule 1 employers shall pay each employee an hourly minimum wage of at least:

  • $11.00 by April 1, 2015
  • $13.00 by January 1, 2016
  • $15.00 by January 1, 2017

Effective January 1, 2018, the hourly minimum wage paid by a Schedule 1 employer shall be increased annually on a percentage basis to reflect the rate of inflation and calculated to the nearest cent on January 1 of each year thereafter

Schedule 1 employers (more than 500 employees in the U.S.) with medical benefits

Schedule 1 employers that pay toward an individual employee’s medical benefits plan shall pay an hourly minimum wage of at least:

  • $11.00 by April 1, 2015
  • $12.50 by January 1, 2016
  • $13.50 by January 1, 2017
  • $15.00 by January 1, 2018

Schedule 2 employers (500 or fewer employees in the U.S.)

Schedule 2 employers shall pay each employee an hourly minimum wage of at least:

  • $10.00 by April 1, 2015
  • $10.50 by January 1, 2016
  • $11.00 by January 1, 2017
  • $11.50 by January 1, 2018
  • $12.00 by January 1, 2019
  • $13.50 by January 1, 2020
  • $15.00 by January 1, 2021
  • $15.75 by January 1, 2022
  • $16.50 by January 1, 2023
  • $17.25 by January 1, 2024

Effective January 1, 2025, the hourly minimum wage paid by a Schedule 1 employer shall equal the hourly minimum wage applicable to Schedule 1 employers.

Schedule 2 employers (500 or fewer employees in the U.S.) with minimum compensation

Schedule 2 employers shall pay an hourly minimum compensation that is the lower of (a) the applicable hourly minimum wage for Schedule 1 employers or (b) the hourly minimum compensation shown in the following schedule:

  • $11.00 by April 1, 2015
  • $12.00 by January 1, 2016
  • $13.00 by January 1, 2017
  • $14.00 by January 1, 2018
  • $15.00 by January 1, 2019
  • $15.75 by January 1, 2020

Schedule 2 employers can meet the applicable hourly minimum compensation requirement through wages (including applicable commissions, piece-rate, and bonuses), tips, and money paid by an employer towards an individual employee’s medical benefits plan provided that the Schedule 2 employer also meets the applicable hourly minimum wage requirements.

Effective January 1, 2025, minimum compensation will no longer be applicable.

CHARTS

Proposed timeline

Schedule of increases

RESEARCH

Two studies were commissioned by the committee that were conducted by Marieka Klawitter, Robert Plotnick, and Mark Long from the University of Washington’s Evans School of Public Affairs; and Ken Jacobs, Michael Reich, and Annette Bernhardt from the Institute for Research on Labor and Employment at the University of California, Berkeley.

COMMITTEE MEMBERS

  • David Rolf (co-chair), SEIU 775NW
  • Howard Wright (co-chair), Seattle Hospitality Group
  • Seattle City Councilmember Nick Licata
  • Seattle City Councilmember Bruce Harrell
  • Seattle City Councilmember Kshama Sawant
  • Janet Ali, Nucor Steel
  • Sarah Cherin, UFCW 21
  • Maud Daudon, Seattle Metropolitan Chamber of Commerce
  • Craig Dawson, Retail Lockbox
  • Bob Donegan, Ivar’s Restaurant
  • David Freiboth, Dr. Martin Luther King County Labor Council
  • Joe Fugere, Tutta Bella
  • Audrey Haberman, Philanthropy Northwest
  • Nick Hanauer, Second Avenue Partners
  • Pramila Jayapal, Center for Community Change
  • Eric Liu, Citizen University
  • Gordon McHenry, Solid Ground
  • Dave Meinart, Onto Entertainment
  • Craig Schafer, Hotel Andra
  • Diane Sosne, SEIU Healthcare 1199NW
  • Nicole Vallestero Keenan, Puget Sound Sage
  • David Watkins, Seattle Hotel Association
  • Michael Wells, Capitol Hill Chamber of Commerce
  • Ronald Wilkowski, Financial Services

FREQUENTLY ASKED QUESTIONS

These Frequently Asked Questions addresses some of the most common questions about the minimum wage ordinance and will be updated regularly.

General provisions

What does the ordinance do?

Seattle City Ordinance No. 124490 establishes minimum wage and compensation rates for employees performing work in Seattle.  The ordinance also prescribes penalties, remedies and enforcement procedures.

When does the minimum wage ordinance take effect?

The ordinance will take effect on April 1, 2015.

Which City department is responsible for administering and enforcing this ordinance?

The Department of Finance and Administrative Services (FAS) is responsible for administering and enforcing the Ordinance.

Employees Covered

Which employees are covered by the Ordinance?

Employees are covered for each hour worked within Seattle city limits.

Does the Ordinance cover employees based outside of Seattle who work in Seattle on an occasional basis?

Yes, the Ordinance applies to “occasional basis employees” – employees who work primarily outside of Seattle, but who work inside the city limits on an ad hoc, irregular basis.

Employees who occasionally work in Seattle are covered if they perform more than two hours of work for an employer within Seattle during that two-week period.

Employees who spend time in Seattle solely for the purpose of travelling through Seattle from a point of origin outside Seattle to a destination outside Seattle, with no employment-related or commercial stops in Seattle except for refueling or the employee’s personal meals or errands are not covered.

Who is responsible for tracking the hours of an occasional basis employee: the employer or the employee?

Employers may require their employees to track their own hours – especially if the employee’s work involves frequent passages in and outside Seattle city limits.  Employers ultimately are responsible for providing employees with information about the Ordinance and ensuring that employees know how track their hours and have the means to do it.

Are employers required to pay the Seattle minimum wage to individuals exempt from the state minimum wage?

No. Certain categories of workers, such as independent contractors, are exceptions to the state minimum wage. For further information on these categories of workers, please consult the Washington State Department of Labor and Industries.

Employers Covered

Which employers are covered by the Ordinance?

All employers with employees performing work in Seattle are covered by the Ordinance.   An employer’s specific minimum wage schedule requirement depends on the number of employees:

  • Schedule 1: employers that employ more than 500 employees in the United States, regardless of where those employees are employed in the United States, and all franchisees that employ more than 500 employees in aggregate in the United States
  • Schedule 2: employers that employ 500 or fewer employees regardless of where those employees are employed in the United States.

How do I determine the number of employees in my company?

The determination of the number of employees will be calculated based upon the average number of employees employed per calendar week during the preceding calendar year for any week where at least one employee worked.   All employees are counted, including:

  • Full-time employees
  • Part-time employees
  • Temporary employees
  • Employees who work outside of Seattle

How do new employers determine the number of employees?

For employers that did not have any employees during the previous calendar year, the employer schedule will be calculated based upon the average number of employees employed per calendar week during the first 90 calendar days of the current year of business.

If an employer has both Seattle and out-of-state employees, does the employer need to count all employees to determine tier size?

Yes. To determine the appropriate schedule, employers must count all employees (full-time, part-time, and/or temporary) who perform work both in Seattle and anywhere in the United States.

An entrepreneur owns a hair salon, a barber shop, and a café as separate businesses. To determine schedule, should the employer consider each of these businesses as completely separate from one another, or do they count as one business?

Separate entities that form an integrated enterprise are considered to be a single employer under the Ordinance. To help decide this question, employers should assess the degree of control exercised by one entity over the operation of another entity. The factors in this assessment include, but are not limited to:

  • Degree of interrelation between the operations;
  • Degree to which the entities share common management;
  • Centralized control of labor relations; and/or
  • Degree of common ownership or financial control over the entities.

There will be a presumption that separate entities, which may share some degree of interrelated operations and common management with one another, will be considered separate employers as long as (1) the separate legal entities operate substantially in separate physical locations, and (2) each separate legal entity has partially different ultimate ownership.

Wages and Compensation

What is included in the definition of “wages” in the minimum wage?

Wages include salary, hourly pay, piece rate, commissions, and non-discretionary performance bonuses.  Tips and employer payments toward a medical benefits plan are not considered wages.

What is included in the minimum compensation requirement for Schedule 2 employers?

Minimum compensation means the minimum wage in addition to tips actually received by the employee and reported to the Internal Revenue Service, and money paid by the employer towards an individual employee’s qualifying medical benefits plan.

What are the minimum requirements for a qualifying medical benefits plan to be included in minimum compensation?

In order for medical plan payments to be included in minimum compensation, the medical benefits plan must be the equivalent of a “Silver” plan or higher as defined in the federal Affordable Care Act, and the employee actually must receive the qualifying medical benefits.

Are there instances where employers may be allowed to offer subminimum wages to employees?

The FAS Director shall have the authority to issue a special certificate authorizing an employer to pay a wage less than the Seattle minimum wage but above the Washington State minimum wage.  Such special certificates shall only be available for the categories of workers defined in RCW 49.46.060 (http://apps.leg.wa.gov/rcw/default.aspx?cite=49.46.060) and shall be subject to such limitations as to time, number, proportion, and length of service as the Director shall prescribe.

But in order to receive a special certificate, an applicant must secure a letter of recommendation from the Washington State Department of Labor and Industries stating that the applicant has a demonstrated need pursuant to WAC 296-128 (http://apps.leg.wa.gov/wac/default.aspx?cite=296-128-010).

The FAS Director will by rule establish the minimum wage for employees under the age of eighteen years, provided that any percentage of the hourly rate established by rule shall not be lower than the percentage applicable under state statutes and regulations.

Minimum Wage and Compensation Schedules

What are the minimum wage requirements for Schedule 1 employers?

For Schedule 1 employers, the required hourly minimum wage steps up to $15 per hour in three years for employers that do not pay towards qualifying medical plan payments.

However, the required hourly minimum steps up to $15 per hour in four years if the employer provides qualifying medical plan payments.  Qualifying medical plan payments must be for the equivalent of a Silver plan or higher as defined in the federal Affordable Care Act.

Schedule 1 employers that do not pay towards qualifying medical plan payments shall pay each employee an hourly minimum wage of at least:

  • $11.00 by April 1, 2015
  • $13.00 by January 1, 2016
  • $15.00 by January 1, 2017

Effective January 1, 2018, the hourly minimum wage paid by a Schedule 1 employer shall be increased annually on a percentage basis to reflect the rate of inflation and calculated to the nearest cent on January 1 of each year thereafter.

Schedule 1 employers that pay towards qualifying employee’s medical benefits plan shall pay an hourly minimum wage of at least:

  • $11.00 by April 1, 2015
  • $12.50 by January 1, 2016
  • $13.50 by January 1, 2017
  • $15.00 by January 1, 2018

What are the minimum wage and minimum compensation requirements for Schedule 2 employers?

Schedule 2 employers have a longer phase-in period to $15 per hour, and they must meet two requirements in each pay period:  minimum wage and minimum compensation.  Hourly minimum compensation includes the hourly minimum wage plus tips and qualifying medical plan payments.

Schedule 2 employers shall pay each employee an hourly minimum wage of at least:

  • $10.00 by April 1, 2015
  • $10.50 by January 1, 2016
  • $11.00 by January 1, 2017
  • $11.50 by January 1, 2018
  • $12.00 by January 1, 2019
  • $13.50 by January 1, 2020
  • $15.00 by January 1, 2021
  • $15.75 by January 1, 2022
  • $16.50 by January 1, 2023
  • $17.25 by January 1, 2024

Effective January 1, 2025, the hourly minimum wage paid by a Schedule 2 employer shall equal the hourly minimum wage applicable to Schedule 1 employers.

Schedule 2 employers shall pay an hourly minimum compensation that is the lower of (a) the applicable hourly minimum wage for Schedule 1 employers or (b) the hourly minimum compensation shown in the following schedule:

  • $11.00 by April 1, 2015
  • $12.00 by January 1, 2016
  • $13.00 by January 1, 2017
  • $14.00 by January 1, 2018
  • $15.00 by January 1, 2019
  • $15.75 by January 1, 2020

Schedule 2 employers can meet the applicable hourly minimum compensation requirement through wages (including applicable commissions, piece-rate, and bonuses), tips, and money paid by an employer towards an individual employee’s medical benefits plan provided that the Schedule 2 employer also meets the applicable hourly minimum wage requirements.

Effective January 1, 2025, minimum compensation will no longer be applicable.

Requirements, Penalties, and Enforcement

What are employers’ notice and posting requirements?

Employers are required to provide employees with notice of (1) the entitlement to minimum wage and minimum compensation, (2) the prohibition against retaliation and (3) the ability to file a complaint if the minimum wage or minimum compensation is not paid or the employee is retaliated against.

How can employers comply with the notice requirements?

Employers may comply with the notice requirements of this Ordinance by:

  • Including a paper or electronic copy of notice in employee handbooks or other written guidance.
  • Distributing a notice to each new employee at the time of hire.
  • Displaying a poster (in English, Spanish and any other languages commonly spoken by employees at the particular workplace) that will be created by FAS in a conspicuous and accessible place in the workplace.

What are employer record-keeping requirements?

Employers shall retain payroll records pertaining to covered employees for a period of three years documenting minimum wages and minimum compensation paid to each employee.

What happens if an employer retaliates against an employee?

Retaliation is illegal. Employers are prohibited from taking an adverse action or discriminating against employees who assert their rights to minimum wage and minimum compensation in good faith.

What are the penalties for failure to pay minimum wage and minimum compensation? 

In addition to payment of unpaid wages, proposed monetary penalties are consistent with the City’s existing labor standards laws and are as follows:

  • Failure to provide notice of the appropriate minimum wage and minimum compensation is a civil penalty of $125 first violation and $250 subsequent violations
  • Interference with the Director in administering, or implementing the requirements in this ordinance is a violation and carries a civil penalty between $1,000 and $5,000.
  • Failure to pay minimum wage and minimum compensation:
    • Warning for first violation and may assess a civil penalty of $500;
    • A civil penalty of up to $1000 per employee for second violation;
    • Maximum of $5,000 for third violation;
    • Maximum of $20,000 for violation of this chapter.

Which City department is responsible for enforcing this ordinance?

The Department of Finance and Administrative Services is responsible for administering and enforcing the Ordinance.

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