October 20, 2016 Articles

Increasing Minimum Wages Across the West Coast . . . and Elsewhere

Progressive employment values are receiving increasing support and becoming codified in municipal and state laws.

By Mona K. McPhee – October 20, 2016

Within an environment in which wage and hour legal actions have increased fourfold since 1997, according to The 2015 Employment Law Guide 125 (Dorsey & Whitney LLP 2015), progressive employment values are receiving increasing support and becoming codified in municipal and state laws.

As part of a broader movement for updates to minimum employment standards, there is a particular focus on raising the minimum wage. Minimum wage affects nearly all employers and covers most workers (including both documented and undocumented workers). Employment pay practices and policies are extensively regulated at the federal and state levels and within many larger municipal jurisdictions. Under federal, state, and municipal law, the most generous wage and hour regulations will apply to the employment relationship, so employers must review the laws of multiple jurisdictions and, based upon where an employee conducts his or her work, comply with the wages most favorable to the employee. 29 U.S.C. § 218(a); see also, e.g., Wash. Rev. Code § 49.46.120; N.Y. Comp. Codes R. & Regs. tit. 12, § 146-1.2.(d).

Changes in wage and hour laws are being proposed, adopted, and implemented throughout the West and elsewhere, with many changes originating via the initiative process. The large cities of Washington and California are at the forefront of the movement to dramatically raise the minimum wage, but there are many developments in the Northeast, too.

Federal Minimum Wage
The federal minimum wage is governed by the federal Fair Labor Standards Act (FLSA) and is currently set at $7.25 per hour for nonexempt employees plus overtime at a rate at least one and one-half times the regular rate of pay after 40 hours of work in a workweek. This rate became effective July 24, 2009. 29 U.S.C. §§ 206(a)(1)(C), 207(a)(1).

While the current evolution in wage and hour laws is occurring primarily at the municipal and state levels, changes expanding who is exempt from federal overtime laws will be finalized by the U.S. Department of Labor in 2016. Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, 80 Fed. Reg. 38,516 (proposed July 6, 2015) (to be codified at 29 C.F.R. pt. 541); Office of Management and Budget, Agency Rule List, RIN 1235-AA11 (Fall 2015). The Department of Labor is currently reviewing comments to its proposed changes to the regulations altering and expanding which executive, administrative, and professional employees (white-collar workers) are entitled to the FLSA minimum wage and overtime pay protections. The rule changes will become effective on December 1, 2016.

Key provisions of the proposed rule include: (1) setting the standard salary level required for exemption at the 40th percentile of weekly earnings for full-time salaried workers (projected to be $970 per week, or $50,440 annually, in 2016); (2) increasing the total annual compensation requirement needed to exempt highly compensated employees to the annualized value of the 90th percentile of weekly earnings of full-time salaried workers ($122,148 annually); and (3) establishing a mechanism for automatically updating the salary and compensation levels going forward to ensure that they will continue to provide a useful and effective test for exemption. The Department last updated these regulations in 2004, which, among other items, set the standard salary level at not less than $455 per week.

Office of Management and Budget, Agency Rule List, RIN 1235-AA11 (Fall 2015). The impetus for these changes is tied to President Obama’s March 13, 2014, presidential memorandum ordering the department to update the rules setting forth which white-collar workers are covered by the FLSA’s minimum wage and overtime standards. 79 Fed. Reg. 18,737 (Apr. 3, 2014).

Washington State Minimum Wage
Washington’s Minimum Wage Act, Revised Code of Washington § 49.46.020(4)(b), regulates Washington’s minimum and overtime wages. Washington’s minimum wage is tied to the federal Consumer Price Index (CPI) and is $9.47 as of January 1, 2016. For a number of years, the State of Washington had the highest minimum wage in the country; but beginning in 2016, the state’s minimum wage fell to the sixth highest.

In 2014, the House of Representatives in Washington’s bicameral legislature passed House Bill 1355, which would have raised the state’s minimum wage in steps, beginning at $10 on January 1, 2016, and increasing to $10.50 a year later, $11 the year after that, and then $12 on January 1, 2019, with later raises based on the CPI, to which Washington’s minimum wage is currently tied. Increasing the Minimum Hourly Wage to Twelve Dollars over Four Years, H.B. 1355, State of Washington, 64th Leg., 2015 Reg. Sess. (Jan. 19, 2015); Wash. Rev. Code § 49.46.020(4)(b). In response to the bill’s failure to pass in 2015 and the fact that the bill remained stalled in 2016, Initiative Measure No. 1433 has been filed with the state’s secretary of state to raise Washington’s minimum wage incrementally to at least $13.50 an hour over four years starting in 2017 and to mandate paid sick leave for employees. The issue appears headed to a public vote on the general election ballot in November 2016.

City of SeaTac approves Proposition 1. During the November 5, 2013, general election, 50.64 percent of voters in the City of SeaTac approved the Proposition 1 initiative, “Setting Minimum Employment Standards for Hospitality and Transportation Industry Employers.” As a result, employees at hospitality and transportation businesses in SeaTac received an increase in minimum wages, paid sick and safety leave, and other benefits. Unlike more recent raises, the minimum wage for SeaTac hospitality and transportation employees was raised directly to $15 per hour without any incremental steps. Prior to adoption of the ordinance, the state minimum wage applied. Thus, the recent changes to the minimum wage for the City of SeaTac occurred as follows:


$ 9.32

2013 state minimum wage

$15.00

January 1, 2014

$15.24

2015, based on annual CPI increase

$15.24

2016, based on (no) annual CPI increase

SeaTac, Wash. Code § 7.45.05.

Seattle creates complex path to $15 per hour. Most municipalities that have adopted significant increases to the minimum wage have done so in a relatively simplistic fashion—via either a straightforward jump to $15 (e.g., SeaTac) or incremental increases, over a period of years, that are the same for all affected employers (e.g., San Francisco, Oakland, Tacoma, as well as the state of Alaska). Given that the Seattle code was created through a collaborative effort among parties from government, labor, and business, the city has created a complex path to $15. In 2014, the City of Seattle implemented legislation, supported by the mayor and passed by the city council, to reach a $15 minimum wage for all workers by 2021 through multiple routes, depending on the size of the employer. Under Seattle’s code, the first date that the minimum wage will reach $15 will be January 1, 2017. The minimum wage is not capped at $15 per hour and will continue to increase based upon ordinance or the CPI rate, depending on the year and the size of the employer. Seattle, Wash. Code ch. 14.19.

To begin, Seattle employers with more than 500 employees nationally who do not make payments toward medical benefits must pay minimum wage in step increases over three years. Those increases are as follows:

$11.00

April 1, 2015

$13.00

January 1, 2016

$15.00

January 1, 2017

$XX.00

Annual increase based on CPI rate beginning January 1, 2018

Seattle, Wash. Code § 14.19.030(A).

Seattle employers with more than 500 employees nationally who make payments toward medical benefits are subject to the following increases:

$11.00

April 1, 2015

$12.50

January 1, 2016

$13.20

January 1, 2017

$15.00

January 1, 2018

Seattle, Wash. Code § 14.19.030(B).

Until January 1, 2025, Seattle employers with fewer than 500 employees will pay the lower of either (i) the minimum wage applicable to large employers or (ii) minimum compensation. The hourly minimum compensation requirement can be paid through wages meeting at least the minimum wage for small employers, plus additional wages, tips, and/or money paid by an employer toward an individual employee’s medical benefits plan.

Minimum Compensation

  • $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

Minimum compensation expires
January 1, 2025.

Minimum Wage for Small Employers

  • $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
  • Same hourly minimum as large employers beginning January 1, 2025

Seattle, Wash. Code §§ 14.19.010, 14.19.040, 14.19.050.

Tacoma approves alternative ballot measure. During the November 2015 general election, voters in the City of Tacoma, Washington State’s second-largest city, had competing minimum wage measures on its ballot. The first measure, a citizen initiative, would have raised the minimum wage from the state’s minimum wage of $9.47 to $15 for all businesses with $300,000 or more in gross annual revenue. In response, the Tacoma City Council created an alternative measure. That measure proposed to raise the minimum wage to $12 over three years. Nearly 60 percent of voters agreed to raise the minimum wage; over 70 percent of voters then chose the city’s alternative measure.

As a result, Tacoma’s minimum wage will change as follows:

$10.35

February 1, 2016

$11.15

January 1, 2017

$12.00

January 1, 2018

$XX.00

Annual increase based upon CPI rate beginning January 1, 2018

Tacoma, Wash. Code § 18.20.060. This minimum wage is available to all employees who work at least 80 hours per year within the city boundaries of Tacoma (including those who telecommute from Tacoma for an employer located outside Tacoma). Tacoma, Wash. Code § 18.20.050; Tacoma, Wash. Min. Wage Rule 1.5 (Jan. 7, 2016).

Spokane rejects Proposition 1. Also during the November 2015 general election, voters in the City of Spokane weighed a Worker Bill of Rights; although they resoundingly rejected Proposition 1 by 62 percent of the vote, the proposition did highlight innovative ideas for improving minimum compensation laws.In particular, the Worker Bill of Rights sought a “family wage” for employees working with employers with more than 150 employees, the right to equal pay for equal work, and the right not to be fired without “just cause.” The initiative also proposed to place workers’ rights over corporate law and limit a corporation’s power to override the proposed rights by explicitly eliminating the right to standing to do so. Spokane Proposition 1, §§ 120.A.1–.A.4 (2015).

The family wage would not have been a set minimum wage but was broadly defined, in part as

a wage that provides for basic needs and a limited ability to deal with future emergencies without the need of public assistance. The City of Spokane shall calculate the family wage to include, but not be limited to, basic necessities such as food, housing, utilities, transportation, health care, childcare, clothing and other personal items, emergency savings, and taxes. . . . If the City of Spokane does not calculate a family wage, then eligible employers must provide, at minimum, a wage equal to the higher of either (1) three times the federal poverty guidelines for a family of two, or (2) any family wage rate previously calculated by the City of Spokane.

Spokane Proposition 1, § 120.B.3 (2015). The initiative’s authors relied on a chart from Dr. Amy K. Glasmeier and the Massachusetts Institute of Technology, which suggested that workers should earn between $18 and $21 per hour in order to make ends meet.

The rights, if enacted, would have applied to

individual[s] employed on a full-time, part-time, temporary, or seasonal basis, including independent contractors, contracted workers, contingent workers, and persons made available to work for the employer through the services of a temporary service, staffing, employment agency, or similar entity. The rights in this section extend to all workers who are physically-present in Spokane for any portion of the worker’s employment.

Spokane Proposition 1, § 120.B.5.

California Minimum Wage
California’s state minimum wage as of April 1, 2016, is $10 per hour. Cal. Lab. Code § 1182.12 (2013). On April 4, 2016, Jerry Brown, California’s governor, signed into law a statewide pathway to a $15 per hour minimum wage by 2022. This legislation arose from a deal that was negotiated between the governor and the labor union, SEIU-United Healthcare Workers West, which had already qualified an initiative for November’s general election to raise the state minimum wage to $15 by 2021. Id.  

In 2014, a number of cities in California codified increases to the minimum wage. During the same year, voters in Oakland and San Francisco approved ballot measures to raise the minimum wage for work within the boundaries of their cities.

Oakland approves Initiative Measure FF. Initiative Measure FF in Oakland was approved by approximately 82 percent of voters during the 2014 general election. Any employee who works at least two hours per week in Oakland, including part-time, temporary, and seasonal workers, is eligible for Oakland’s minimum wage. Paid sick leave is also now a benefit for employees in Oakland. Oakland, Cal. Code § 5.92.030. The recent changes to the minimum wage in Oakland occurred as follows:

$ 8.00–10.00

Varying state minimum wage

$12.25

March 2, 2015, followed by annual adjustment based on CPI

$12.55

January 1, 2016

Oakland, Cal. Code § 5.92.020; Cal. Lab. Code § 1182.12 (2013).

San Francisco approves Proposition J. In 2014, more than 77 percent of San Francisco voters approved Proposition J, a referendum to raise the minimum wage to $15 by 2018. Any employee who works at least two hours per week in San Francisco must be paid the minimum wage for each hour worked within the boundary. The minimum wage as of January 1, 2015, was $11.05. Thereafter, Proposition J required raises as follows:

$12.25

May 1, 2015

$13.00

July 1, 2016

$14.00

July 1, 2017

$15.00

July 1, 2018

$XX.00

Annual increase based upon CPI rate beginning July 1, 2019

S.F., Cal. Admin. Code § 12R.4 (2014).

Alaska Minimum Wage
In Alaska, a statewide move to increase the minimum wage succeeded in 2014. With approximately 70 percent approval, voters in the state adopted Ballot Measure 3. Prior to the initiative, the state minimum wage was $7.75, based on law that required the wage to exceed the federal minimum wage by $0.50. Alaska Stat. § 23.10.065(a) (2014). Following its adoption of Ballot Measure 3, Alaska will continue its tradition of remaining, at least, above the federal minimum wage:

$ 8.75

January 1, 2015

$ 9.75

January 1, 2016

$XX.00

Annual increase based upon CPI rate but at least $1.00 more than the federal minimum wage

Alaska Stat. § 23.10.065(a) (Feb. 24, 2015).

Northeastern Minimum Wage
The trend in rising minimum wage is expanding in the Northeast; however, it is expanding more slowly because there is significantly less support for change in the Northeast than in the West.

New York City and State implement notable minimum wage increases. Following a wage board increase for certain fast-food workers to reach $15 per hour by 2018 in New York City and by 2021 statewide, Governor Andrew Cuomo of New York State launched a statewide campaign to raise the state minimum wage to $15 by 2021 (and by 2018 in New York City). This campaign achieved swift success, and Governor Cuomo signed legislation raising the minimum wage only hours before Governor Brown did so in California. Under the new law, New York City’s schedule remains. Employees in Nassau, Suffolk, and Westchester Counties will see an increase to $10 at the end of 2016, with a $1.00 increase each year until reaching $15 on December 31, 2021. Employees in the rest of New York will see the minimum wage increase to $9.70 at the end of 2016, then another $0.70 each year thereafter until reaching $12.50 at the end of 2020. The increases will continue to $15 based on an indexed schedule to be set by the director of the Division of Budget in consultation with the Department of Labor.

Other northeastern states offer mixed news on minimum wage. In Pittsburgh, city employees benefit from a $15 minimum wage. And, on March 7, 2016, Pennsylvania Governor Tom Wolf announced an executive order that requires Pennsylvania state employees and employees working on future state contracts to be paid at least $10.15 an hour. Nonetheless, Pennsylvania’s statewide minimum wage remains at $7.25.

In Massachusetts, the statewide minimum wage is $10; but for home health-care workers, the minimum wage is $15.

The New Jersey minimum wage, controlled by that state’s constitution, is $8.38. However, there is some political support to move toward $15.

In Washington, D.C., the minimum wage will rise to $11.50 on July 1, 2016. After that, inflation will determine annual increases, if any.

There is, currently, little political movement for raises in the minimum wage in the South, where, in some jurisdictions, it is well below the federal minimum wage (e.g., as of April 1, 2016, Georgia’s minimum wage is $5.15).

Conclusion
With the U.S. Department of Labor adjusting regulations to make overtime wages more broadly applicable, a statewide raise in the minimum wage in Alaska, and successful efforts to make $15 per hour the standard in California and New York with strong movements in Washington and other western states, progressive wage laws will undoubtedly become a fixture in the employment law landscape for the next decade. The battles over the legislation, compliance, and enforcement of these laws are likely to be an interesting challenge to plaintiff and defense employment attorneys alike.


Keywords: litigation, employment and labor relations law, minimum wage, West Coast, Washington, California, New York, FLSA, Consumer Price Index


Mona K. McPhee is a partner and director of litigation at Desh International and Business Law in Bellevue, Washington.


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