Seattle’s minimum-wage law takes effect in just eight weeks, but uncertainty remains widespread about the details and the potential ripple effects.
Malcolm Cooper-Suggs, who works at a McDonald’s in downtown Seattle, is eagerly awaiting April 1, when his wage will rise from $9.47 an hour to $11 an hour.
David Jones, who owns two Subway franchises in Seattle, is planning to raise the wages of his employees at that point. But he’s also worried about how he’ll offset the approximately $250 a week per store the wage increase will cost, and about small, competing restaurants on his street that will have more time to raise their employees’ wages.
And Jan Simon, president and CEO of the Washington Lodging Association, says there are still a lot of questions among her members about what the law will actually require.
Seattle’s new minimum-wage law
Large employers (501+ employees): Starting April 1, must pay their minimum-wage workers $11/hour. Will reach $15 by 2017. Large businesses that provide health-care benefits will have until 2018 to reach $15.
Small employers (500 or fewer employees): Must pay “minimum compensation.” Starting April 1, two ways of reaching minimum compensation: 1) pay a flat hourly rate of $11 or 2) pay a reduced rate of $10 an hour with the $1 difference made up in tips or payments to a qualifying medical-benefits plan. If the tips or medical-benefits payments do not make up the difference, the employer must do so each pay period. Small employers paying a flat hourly rate will reach $15 by 2019. Those who choose the second option will pay $15 by 2021.
For more information: www.seattle.gov/civilrights/minimumwage.htm
Source: city of Seattle
The law, which increases the minimum wage for workers in Seattle until it reaches $15 by 2021 at the latest, goes into effect in two months.
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But even as workers are eagerly anticipating the wage bump, some employers are uncertain about how to proceed. They wonder, for instance, how tips factor into the formula for calculating what they have to pay, and whether increasing the pay for their minimum-wage workers in Seattle might have ripple effects such as other workers in the company expecting raises as well.
To clarify some of the confusion, the city is working out rules for areas where the ordinance isn’t clear, such as whether the payment rate for temp workers is determined by the size of their staffing agency or the contracting employer. It’s also ramping up its outreach efforts.
“We understand learning all the complexities is going to involve a learning curve for workers and businesses,” said Karina Bull, policy analyst and business liaison with the city office that oversees the implementation of the minimum-wage law.
The minimum-wage ordinance, passed by the Seattle City Council and signed by Mayor Ed Murray last June, says that starting April 1, large organizations with more than 500 employees in the U.S. must pay their minimum-wage workers $11.
Smaller businesses with 500 or fewer employees will have to pay what the city is calling a “minimum compensation” of $11. They have two ways of reaching that minimum compensation: either by paying a flat hourly rate of $11, or by paying a reduced rate of $10 an hour with the $1 difference made up in either tips or payments made to a qualifying medical-benefits plan.
Some members of the Washington Lodging Association are still unclear about the details of the minimum-compensation requirement, said Simon.
Some franchise owners, she said, are also upset that they’re classified as large employers under the ordinance, which would place them on a faster track for employee wage increases than that for small businesses.
The International Franchise Association and five local franchisees in June sued the city, saying the provisions in the law treating franchises as large businesses were discriminatory. The association later asked a judge in the U.S. District Court in Western Washington to block that portion of the law from going into effect. A hearing on whether to grant that request is scheduled for March 10.
Cities with high minimum wages
Berkeley, Calif.: Currently $10; $12.53 in 2016
Chicago: $10 in July; $13 by 2019
Mountain View, Calif.: $10.30 in July, with annual cost-of-living adjustments
Oakland, Calif.: $12.25 in March, with annual cost-of-living adjustments
San Francisco: Currently $11.05; $12.25 in May, $15 in 2018, then annual cost-of-living adjustments
San Jose, Calif.: Currently $10.30, with annual cost-of-living adjustments
Santa Fe, N.M.: Currently $10.66, with annual cost-of-living adjustments
Seattle: $11 minimum compensation on April 1. Will reach $15 between 2017 and 2021 depending on size of firm and whether health benefits are offered
SeaTac: Currently $15 for workers at hotels with 100 or more rooms and at least 30 nonmanagerial employees, and parking lots with more than 100 spaces and at least 25 nonmanagerial employees
Sunnyvale, Calif: Currently $10.30, with annual cost-of-living adjustments
Washington, D.C.: $10.50 in July; $11.50 in 2016, then annual cost-of-living adjustments
Sources: Ken Jacobs, chairman, University of California, Berkeley, Labor Center; National Employment Law Project; National Law Review; The Seattle Times; cities
Jones, who owns one Subway franchise on 12th Avenue across from Seattle University and another on Fourth Avenue South in Sodo, says it’s unfair that he, as owner of two stores that employ about nine employees each, is being treated like a company with more than 500 employees.
Sure, he receives some of the benefits of being part of a larger organization. People immediately recognize the Subway brand name and corporate headquarters pays for marketing. But, Jones said, he doesn’t get those things for free. Each year, 12.5 percent of his revenue goes to the parent company, with 8 percent of that paying for royalties and 4.5 percent of it going to marketing.
And, he says, there are eight competing restaurants on his block, four of them small businesses “that won’t catch up to me in wages until 2021.”
He’s debating whether to raise prices on certain menu items or to impose a 4 percent surcharge on items across the board.
The approximately 60 Subway franchises in Seattle are discussing as a group what makes the most sense.
“We won’t all do the same thing but there will be a recommendation of what makes sense,” he said.
Jones is also trying to decide if it would be better to give all his employees currently making below $11 the current flat wage increase to $11, or to use the minimum-compensation formula for those employees who took up the offer of health benefits.
“If I have an employee on insurance and another not, they can have a different wage and it’s up to me to implement that,” Jones said. “The administrative nightmare of it — thank God I only have 18 employees, not 500.”
Jones said he plans to give the managers in his stores raises on April 1 as well, although they’re making above the minimum wage.
“It’s important to me to attract quality managers, and I think if I do not create enough gap between the two jobs (managerial and nonmanagerial), I don’t have the interest from the right kind of people to make my store successful.”
That type of ripple effect is a concern for some employers, said Candi Avery, an audit principal at accounting firm Clark Nuber.
Some employers have indicated that because they’re raising the lowest wages, they may need to increase the compensation for higher-paid workers as well, she said. And some companies with multiple sites — some in Seattle and some outside of the city — are pondering raising wages across their different locations. For such companies, “it’s hard to raise wages in Seattle but not in the other areas,” Avery said.
The city, meanwhile, is trying to clarify some of the confusion.
It’s posted fact sheets and answers to frequently asked questions posted on its “Seattle Minimum Wage Ordinance” website.
And it’s working on a revised, multilingual website, as well as a wage-calculator app that will let employers figure out how much they should pay their staff, and let employees figure out how much they should be earning. The city expects both to launch in March, said Bull, the business liaison with the city office overseeing the minimum-wage law.
The first draft rules clarifying parts of the ordinance are expected to go out for comments soon. Final rules are scheduled to be posted toward the end of February or beginning of March.
The city will initially focus on outreach and education, spending $1 million over the next two years to contract with community organizations to make sure all workers know what wages they are due, Bull said.
The city is also planning bus, radio and print ads, and direct mailings to businesses, as well as training for businesses and the community.
For Tom Geiger, spokesman for UFCW 21, the local union that represents grocery, health-care and other workers, the new law is hardly complicated.
“What’s complicated is trying to make ends meet on less than $10 an hour,” said Geiger, who contends it was the business interests that added the complications, such as having different schedules for different-size employers.
Some businesses have already gone ahead and raised the minimum they pay their employees.
Central Co-op, a cooperative grocery store on Capitol Hill, has put into effect a contract signed earlier this year with its grocery employees union raising entry-level pay (for those who complete a 60-day trial period) from $12.20 an hour to $15.36, including a cost-of-living adjustment. The change will affect about 13 current employees as well as any future hires.
The store was already paying above the state’s minimum wage of $9.47 but “we decided to adopt the $15-an-hour minimum wage early as an opportunity to live out the values of our organization,” said Susanna Schultz, marketing manager with Central Co-op.
“It will have an impact on the bottom line,” she said. “But we expect the ultimate impact to be positive. The quality of life of employees will go up. They’ll feel more successful at work and productivity will go up.”
Meanwhile, Cooper-Suggs, 21, who works at the McDonald’s at Third Avenue and Pine Street in downtown Seattle, said the boost in his wages come April could help him find his own place.
He grew up in Seattle but moved to Auburn because it was cheaper. But he missed Seattle and last month moved into his aunt’s place in South Seattle.
“After we take care of our bills, we find ourselves with no leftover,” he said of himself and his co-workers’ current pay. “With this wage increase, and having roommates, I’d have money on the side. It would take a lot of stress off my shoulders.”