October 31, 2014

By Candi Avery, CPA, CGMA

The City of Seattle will soon have the highest minimum wage in the nation. In June 2014, the Seattle City Council signed into law an ordinance that increases the minimum wage for employees working in the City of Seattle to $15 an hour over the next 3 to 7 years, dependent upon the size of the business.

The law becomes effective April 1, 2015, and employers should prepare now for proper implementation. The following are some key provisions of the law and considerations that will help your organization prepare.

Who Does It Apply To?

The new ordinance applies to all businesses with employees performing work within Seattle city limits regardless of where the business’ office is located. The business will be required to pay the minimum wage to employees for each hour worked within Seattle city limits if they worked in Seattle for more than 2 hours in a 2-week period.

The ordinance does exclude individuals performing services under a work study agreement and certain employees that are working under a special certificate pursuant to RCW 49.46.060 (learners, apprentices, messengers, disabled). In addition, the city’s Department of Finance and Administrative Services (FAS) Director will establish the minimum wage requirements for employees under the age of 18.

Multi-Year Tiered Phase in Period

The minimum wage requirements will be phased in over a 7-year period based on the number of employees a business has and if the employer is contributing to a qualified medical plan.

Small Employers (fewer than 500 U.S. Employees)  

table 1

**The City of Seattle has introduced the concept of “minimum compensation” which is defined as the minimum wage (salary, hourly pay, commissions, and non-discretionary performance bonuses) plus tips received by the employee and reported to the IRS and contributions paid by the employer towards the employee’s qualifying medical benefits plan. Contributions to an employee’s qualifying medical plan may be included in minimum compensation if the employee receives medical benefits from a “Silver” plan or higher as defined by the federal Affordable Care Act.

Large Employers (more than 500 U.S. Employees)

table 2

The “minimum compensation” concept does not apply to large employers. However, as noted above, large employers are subject to a tiered minimum wage if they contribute to an employee’s qualifying medical plan.

Employee Notification Requirement

The ordinance requires businesses to give notice to employees that (1) they are entitled to receive minimum wage and minimum compensation, (2) employers are prohibited from retaliating against an employee who exercises their rights and (3) that an employee has the right to file a charge against the employer if minimum wage/compensation is not paid. The city Department of Finance and Administrative Services will publish an annual poster that can be displayed at a workplace to meet this requirement. Alternatively, an employer could include this notice in the employee handbook and/or distribute to each new employee at the time of hire. Failure to comply with notice requirements will subject the organization to a fine of $125 for the first violation and $250 for each subsequent violation.

Take action now to prepare your organization for compliance with Seattle’s new minimum wage laws.

The full ordinance and detailed FAQ document can be found on the Seattle city website at www.seattle.gov.

© Clark Nuber PS, 2014.  All Rights Reserved

This article contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.