To read all five installments of this wage lien series, click here.
On April 16, 2021, the Washington Wage Recovery Act, SB 5355 (the “Act”) was signed into law. The Act has significant implications for employees, employers, and secured lenders. In the first installment in a series about the Act, we provided an overview of employee wage claims and the newly created statutory wage lien.
In our second installment, we will discuss the scope of the Act, focusing on the persons and property impacted.
Who May Be Impacted by a Wage Lien?
A wage lien will generally be brought by an employee against the employer’s real and personal property. A wage claim, which forms the basis for a wage lien, consists of “unpaid wages owed to the claimant as an employee of an employer,” among other sums.
The Act defines employee broadly, including any individual currently or formerly permitted to work by an employer. Employer is defined broadly as well, including individuals, corporate entities, and persons or groups of persons “acting directly or indirectly in the interest of an employer in relation to an employee.” A wage lien is also effective against the community property of the employer and the employer’s spouse or domestic partner and against the estate of an employer.
It is unclear whether a wage lien may also be able to attach to the property of an officer, vice principal, or agent of the employer when that officer, vice principal, or agent willfully and intentionally commits certain wage violations. Regardless of whether a wage lien may attach to the individual’s property, there continues to be the possibility of personal liability for individual officers, vice principals, or agents who participate in the employer’s willful wage violations.
There are some exceptions regarding who can establish a wage lien and against whose property wage liens can be established. Specifically,
- Highly compensated employees cannot establish wage liens. Highly compensated employees are employees who (a) were five percent owners of the business where employed during the current or preceding year, or (b) received compensation from the employer in the preceding year in excess of the indexed compensation set by the U.S. Department of Treasury, which was $130,000 in 2020.
- An employee cannot establish a wage lien for any wage claim that is or would be subject to a construction lien by the same employee under RCW chapter 60.04.
- Wage liens do not affect the ownership or title of property of the state or other public entities.
While the employee may be the person originally owed the wages, another person may end up establishing or foreclosing upon the wage lien. Wage liens, the right to assert wage liens, and the right of action to recover wage liens are all assignable. The assignee is vested with all rights and remedies of the assignor (i.e., the employee), subject to applicable defenses.
Further, the Act allows for a foreclosure action on a wage lien to be brought by the employee individually, or by a number of other interested parties, including the Washington Department of Labor and Industries, the U.S. Department of Labor, the Office of the Attorney General, and a collective bargaining or class representative of the employee.
What Property is Subject to a Wage Lien?
The Act allows an employee to establish a wage lien against the following property owned or subsequently acquired by the employer:
- Real property in Washington
- Goods and tangible chattel paper in Washington
- Accounts and payment intangibles anywhere
Goods, chattel paper, accounts, and payment intangibles have the same definitions as used in Washington's codification of Article 9 of the Uniform Commercial Code.
An employee who maintains real property in Washington can also establish a lien against that property for its wages for maintaining the property. Maintenance includes cleaning, managing, improving, and repairing real property for an owner or the owner's tenants, among other similar activities.
Moreover, the wage lien is not limited to the property itself. A wage lien also attaches to all identifiable proceeds of property except instruments and chattel paper.
Having discussed the Act generally and what persons and property are impacted, our next installment will discuss the mechanics of how the Act works, and how wage liens are established and foreclosed.