Washington’s recently enacted legislation, the Washington Wage Recovery Act, SB 5355 (the “Act”), creates a new statutory lien for employees’ unpaid wage claims against their employers. The Act has significant implications for employees, employers, and secured lenders. In the third installment of our series on the Act, we will discuss how wage liens can be established and foreclosed. If you missed our first two installments, you can access them here.
Establishing Wage Liens
The Act sets forth detailed instructions for establishing wage liens. The specific instructions vary depending on the type of property involved and the location of the property.
Generally, a wage lien is established by filing a notice of claim of wage lien (for real property or titled personal property) or financing statement (for non-titled personal property) with the appropriate office or agency. Both the notice of claim of wage lien and the financing statement require the claimant to provide certain basic information, including the name of the employer and the property covered by the wage lien. The lien claimant will need to pay any related filing fees and mail a copy of the notice of claim of wage lien and financing statement (if applicable) to the employer or its registered agent. If the affected property is real property and the employer is not the owner, the notice of claim of wage lien must also be mailed to the owner of the property.
The Act describes in more detail what information the notice of claim of wage lien must include and provides a form of notice that lien claimants can use.
The notice of claim of wage lien must be filed within the two years after the allegedly unpaid wages were first due.
Foreclosing Wage Liens
A wage claimant can foreclose a wage lien judicially by filing a foreclosure action in the appropriate court. The court in which the foreclosure action can be filed depends on the type of property involved. For example, real property in Washington can only be foreclosed by a state superior court or a federal district court in Washington if the action is brought by the U.S. Department of Labor. Depending on the value, personal property can be foreclosed in a state district court or a state superior court in Washington.
Generally, the foreclosure action must be commenced within eight months after the wage lien is recorded. However, if the wage claim is separately determined by a court that is not authorized to conduct foreclosure of the property (such as an out-of-state court), or an administrative agency (such as the Washington Department of Labor & Industries), the claimant must commence foreclosure within 90 days after the court enters its judgment or the administrative agency's citation and its notice of assessment becomes final and binding.
A wage lien can also be foreclosed administratively by a state or local government agency.
If a court determines the amount of wages owed on a wage claim, or an agency makes a final and binding assessment of wages, that amount will be determinative in any foreclosure.
In the foreclosure judgment, the court may order that the affected property be sold at a sheriff’s auction or be transferred to the lien claimant. A writ of sale can be issued anytime up to ten years after the judgment for the wage claim is issued. A lien claimant who prevails in a foreclosure action is entitled to costs, including attorney fees.
An Extra Step When the Property is Real Property
If the affected property is real property, the wage claimant will also need to file a notice of pendency of wage claim with the county auditor where the property is located. The notice of pendency of wage claim must be recorded after the action on the wage claim has been commenced, but within eight months after the wage lien is recorded. The Act details what information the notice of pendency of wage claim should include.
If the wage claim is filed with an administrative agency or with the Washington Department of Labor & Industries, the agency or the Department files the notice of pendency of wage claim.
Don’t Forget to Read the Act or Consult an Attorney
The Act’s requirements for establishing and foreclosing wage liens are detailed and precise. Persons who may be impacted by wage liens should familiarize themselves with the Act’s language or consult with an attorney to better understand all the requirements involved.
In the fourth installment of our series on the Act, we will discuss how wage liens can be extinguished, contested, and released. Stay tuned for more information on this important legislation.