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Minimum Wage and Payroll Tax Changes Effective July 1, 2023, in Oregon and Washington



Oregon Minimum Wage Increases

Oregon’s Bureau of Labor and Industries (BOLI) recently announced the precise annual increase to Oregon’s minimum wage rates, which will go into effect on July 1, 2023. Oregon’s minimum wage rates will increase as follows:

  • Standard Minimum Wage: $14.20 per hour (up $.70 from $13.50)
  • Portland Metro Minimum Wage: $15.45 per hour
  • Non-Urban Minimum Wage: $13.20 per hour

The Portland Metro Minimum Wage and Non-Urban Minimum Wage are $1.25 greater than and $1.00 less than the standard minimum wage, respectively.

For employers who may not be familiar with the two subcategories of Oregon’s minimum wage, the “Portland Metro” minimum wage applies within the Portland Metropolitan Service District, comprised of Washington, Clackamas, and Multnomah counties. Employers within this area will be required to pay the higher minimum wage. In contrast, employers with employees working in “Non-Urban” counties will pay the lower minimum wage. Non-Urban counties consist of half of Oregon’s 36 counties:

  1. Baker
  2. Coos
  3. Crook
  4. Curry
  5. Douglas
  6. Gilliam
  7. Grant
  8. Harney
  9. Jefferson
  10. Klamath
  11. Lake
  12. Malheur
  13. Morrow
  14. Sherman
  15. Umatilla
  16. Union
  17. Wallowa
  18. Wheeler

Employees working in areas other than Portland Metro and the Non-Urban Counties must be paid at least the Standard Minimum Wage Rate. Employers should ensure that their payroll systems are updated accordingly, and budget for these mandatory increases for roll-out on July 1, 2023.

Washington Cares Act Payroll Deduction Begins

Also beginning July 1, 2023, employers of most Washington state resident employees must implement a mandatory employee payroll deduction (0.58% tax on gross wages) required by the Washington Cares Act. The new law creates a state-run fund intended to help state residents pay for the cost of long-term care (LTC) if they need it someday. Initially, employers were supposed to begin collecting this tax in January 2022, but the legislature delayed implementation of the tax until this year. We had anticipated other changes would be made to the Act during the current legislative session, but that now looks unlikely.

The tax applies to most Washington-based employees unless an exemption applies. The exemption period for those with their own LTC insurance has expired. In anticipation of the tax, many employees qualified for the exemption during the exemption period by purchasing private insurance policies. The exemption does not currently require the private policy continue—it only had to be in place during the exemption period. Therefore, many employees plan to cancel private polices or may have already done so. However, proposed legislation would modify this exemption, and require periodic recertification of an existing private LTC insurance policy.

Employees who have been granted an exemption by the state due to having their own insurance must provide the employer with documentation demonstrating that the exemption has been granted. If they have not done so by July 1, 2023, the employer must begin deducting the tax from the employee’s paychecks.

Self-employed persons and employees of federally recognized tribes are also exempt. Additional exemptions have been established through legislation since enactment of the original Washington Cares Act, including exemptions for disabled veterans, spouses or domestic partners of active-duty military stationed or deployed outside of Washington, nonimmigrant visa workers, and employees of Washington employers who maintain a primary residence outside of Washington.

Notably, unionized employers will also have to implement the tax, and will typically have obligations to bargain over that tax. Those employers operating under a Collective Bargaining Agreement in existence as of 2017 are exempt, for now. In the rare situation where an existing CBA is over six years old, the obligation to implement the tax will arise as soon as the CBA is opened for negotiations. The Employment Security Department must be notified when negotiations open.

Tukwila Minimum Wage

As Susan Stahlfeld explained in detail in her February 1 Employment Law in Motion blog post, Tukwila has established a city-specific minimum wage that sets its minimum wage on par with nearby SeaTac and Seattle. The Tukwila minimum wage requirements go into effect on July 1, 2023.

For large employers (i.e. over 500 employees worldwide, including franchises), the 2023 minimum wage will be $18.99/hour. For mid-size employers (i.e. 15-500 employees worldwide or gross revenue over $2 million), the 2023 minimum wage begins at $16.99/hour in 2023. “Small employers” (fewer than 15 employees worldwide and gross revenues less than $2 million) are exempt from the city minimum wage. The requirements apply to all hours an employee works inside the Tukwila city limits, even if the employee is based outside the city. The ordinance has other requirements, as well, pertaining to tips and scheduling. For more details, see our previous post.

For more details regarding the requirements of these laws, or if employers have questions regarding implementation and/or compliance, please contact counsel.

This article is provided for informational purposes only—it does not constitute legal advice and does not create an attorney-client relationship between the firm and the reader. Readers should consult legal counsel before taking action relating to the subject matter of this article.

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