As we look ahead to 2022, it’s time to remind Washington employers that the Washington Wage Recovery Act (the “Act”) becomes effective January 1, 2022. Under the Act, employees can attach a lien (i.e., a legal hold) on certain property for allegedly unpaid wages owed. The purpose of the wage lien is to secure payment for wage claims. In practice, the Act will allow employees to burden property with a lien before a wage claim is even filed or pending. Beginning January 1, 2022, Washington employers may find that they receive notice of a wage claim lien even before notice of a lawsuit or filing with the Department Labor & Industries.
This new law broadly defines “employer” to include individuals, partnerships, associations, corporations, business trusts, or any person or group of persons acting directly or acting indirectly in the interest of an employer in relation to an employee. Also included are individuals or entities who are not the direct employer if they share a business relationship with the direct employer under which they are acting in the “interest of” the direct employer, such as staffing agencies, subcontractors, and joint employers. The Act leaves the outstanding question of whether a wage lien may be attached to the property of an officer, vice principal, or agent of the employer when that individual willfully and intentionally commits certain wage violations.
“Wage claims” are also broadly defined to include claims for any unpaid wages owed to the employee, as well as any other compensation, interest, statutory damages, statutorily mandated paid leave, liquidated damages, attorneys’ fees and costs, or statutory penalties. It does not include vacation, severance pay, paid leave not statutorily mandated, or contributions to an employee benefit plan.
“Highly compensated employees” are excluded from coverage. Any employee who was a five percent (5%) owner of the business in the current or preceding year, or who received compensation the previous year in excess of “highly compensated employee” indexed salary under 26 U.S.C. § 414(q) for purposes of a qualified retirement plan ($130,000 in 2021) is considered a “highly compensated employee” under the Act.
Unlike most laws affecting wage claims that allow claims to be brought for three years after they are due, the wage lien is limited to two years from when the wages were first due.
Preparing for the Fight Ahead
To prepare for the Act, Washington employers with existing debt should work with their bank to review whether the existence of a wage lien or the filing of a related foreclosure lawsuit will cause a default under the employer’s loan documents.
Second, the Act’s requirements for establishing and foreclosing wage liens are detailed and precise. If a wage lien is received, Washington employers should familiarize themselves with the Act’s language or consult with competent counsel to confirm that the lien has been correctly filed and is valid. Failure to meet all of the Act’s procedural steps and requirements can be a basis for employers to extinguish a wage lien. For details on the Act’s procedural steps and requirements, please see a series of blog posts prepared by the Miller Nash financial services team.
Finally, as a best practice, Washington employers should conduct regular audits of time and payroll records for compliance, maintain records for the required time period, and revisit business policies annually to reflect and comply with new changes in state and federal laws.
