United States: Washington Employment Law 2018 Year In Review

It is that time of the year again, when we turn on our out-of-office messages and spend at least a few days doing what we love, whether it's seeing our friends and family, hitting the beach or slopes, or just curling up on the couch and binge-watching the shows we missed during the year. It's also the time to reflect on what has happened over the past 12 months and to plan for the year ahead.

For employers in Washington, there is much to reflect on, and plan for, in 2019. Here are the highlights of the most significant changes to Washington employment law over the past year, and for the year to come. 

Washington Employers Must Begin Collecting Premiums for the State-Run Paid Leave in 2019 

Perhaps the single greatest change in the law for Washington employers was the enactment of not one, but two paid leave laws. 

First, pursuant to an initiative passed by voters, as of January 1, 2018, non-exempt employees now receive one hour of paid sick leave for every 40 hours worked. Leave can be used to attend to employees' health needs or the health needs of their family members, among other things, and can be used beginning on the 90th day of employment. If employees do not use this leave, they won't lose it, and they are able to carry over 40 hours of the leave to the next year. Furthermore, employees receive their normal rate of pay for each hour of sick leave they use. 

Second, pursuant to a law passed by the legislature, starting in 2020, almost all employees who work in Washington will get up to 12 weeks of paid family and medical leave for their own health needs or those of a family member, to bond with a new child, or for certain military-connected events. Unlike the other form of leave, which is paid for by the employer, this leave program is run by the state and in order for an employee to take leave, they must apply for benefits from the State of Washington Employment Security Department (ESD). Unlike leave under the first law, in which the employee receives their normal rate of pay, under this system an employee will only receive partial wage replacement, with the dollar amount being capped at $1,000 per week with a minimum of $100, calculated as a percentage of the employee's gross wages. 

To fund this program, the law requires that employers begin collecting premiums beginning on January 1, 2019. These premiums must be remitted to the ESD quarterly, starting in April 2019, along with a report on the number of hours and wages paid to those employees. Initially, the premium will be 0.4% of the employee's salary but, in 2020, this percentage will be adjusted by the state. Employers with at least 50 workers can withhold up to 63.333% of the premium from the worker's wages and pay the remaining 37.667%. Employers with fewer than 50 employees do not have to pay an employer portion of the premium but can instead take the entire premium from the employee. Sole proprietors are not required to participate in the program, although they can choose to do so. 

Grants are available to small businesses to help cover the costs of hiring temporary workers when an employee takes leave. To be eligible, the business must average 150 or fewer employees. Businesses with fewer than 50 employees who are not contributing to the program are not eligible for the grants. These employers have to pay their share of the premiums to be eligible for grants. 

Washington's Increasing Minimum Wage Continues to, Well, Increase, in 2019

Another Washington statute that continues to unfold is the state's wage law. Although first passed in 2016, the law requires incremental increases in the minimum wage over a number of years. 

It began with an increase to $11.00 in 2017 and $11.50 in 2018. On January 1, 2019, the minimum wage will increase to $12.00. Wages do not include tips, so an employer cannot rely on tips the worker received in claiming that the employee is earning the minimum.

Arbitration Clauses, for At Least Some Businesses, Will Be Unenforceable in 2019

Washington was not immune to the "#MeToo" movement. In 2018, the state passed a law that voids as against public policy any provision in an employment agreement that waives a worker's right to file a discrimination claim in court or with a government agency, or that requires that the claim be resolved in a confidential dispute resolution process. The law, in short, bars contractual arbitration clauses in employment agreements. 

This law is likely only partially enforceable. Whether it is or is not enforceable will depend on whether the arbitration clause is governed by state or federal law. If the arbitration clause is governed by Washington's Arbitration Act, the law will apply, and bar arbitration. It likely does not apply, however, to arbitration agreements governed by the Federal Arbitration Act (FAA).

The Supreme Court has made clear that, under the preemption doctrine, a state cannot attempt to block enforcement of the FAA. AT&T Mobility v. Concepcion, 563 U.S. 333 (2011) (holding that the FAA preempts state laws that prohibit contracts barring class-action arbitration). Because the state law attempts to block the freedom to arbitrate, it will be preempted by the FAA in any case where the agreement is governed by federal, rather than state, law. 

Furthermore, given the breadth of the FAA, which applies to any agreement "affecting interstate commerce," Washington's law voiding such agreements would only impact employers that are truly and solely intrastate in nature. Washington employers who do not affect interstate commerce by buying or selling goods interstate, for example, are likely unable to enforce their arbitration agreements. 

Farmers Can No Longer Just Pay Piece-Rate in 2019

The last major change for Washington employers, and those in the agricultural sector in particular, was handed down by the Washington Supreme Court. In May, that court issued its ruling in Carranza v. Dovex Fruit Co., 190 Wn.2d 612, 416 P.3d 1205 (2018), which upended an established method of compensation used by farmers known as "piece-rate" which is based on production (e.g., the number of bins of apples) rather than time or job duties. 

Under federal wage and hour law (as well as Washington state law until the Carranza decision), a piece-rate pay system complied with the law if the week's pay was more than the minimum wage for the hours by that employee that week. For example, if a worker was paid $1,000 in piece-rate pay and worked 40 hours, the pay complied with the law because the worker was paid more than minimum wage ($25 per hour, to be exact) for each hour worked. This method of pay was known as "work week averaging." 

In Carranza, however, the Washington Supreme Court held that work week averaging does not apply to agricultural workers paid piece-rate. Instead, the piece-rate pay applies only to work that qualifies as piece-rate work and does not apply to time spent by the worker that was not piece-rate work. For that, according to the court, the worker has to be paid separately, by the hour. For example, if an apple picker spends one hour per week traveling between orchards, the apple picker must be paid by the hour for that time spent traveling – assuming, that is, that the travel time does not count toward piece-rate work performed by the worker in picking apples. 

In differentiating between the types of work performed by piece-rate workers in this manner, the Washington Supreme Court fundamentally changed agreements between employers and their workers. Making matters worse for farmers and other agricultural employers, the Washington Supreme Court did not answer the critical question of what work constitutes piece-rate work and what does not. Not surprisingly, following this decision, farmers and other agricultural employers are now dealing with a rash of wage and hour class-action lawsuits by piece-rate workers.

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