Washington State’s New Lien Law Increases Pressure on Employers to Pay Wage Claims: What’s Next? | Fox Rothschild LLP
When the DOL audits an employer and finds that wages are owed, the employer, while unhappy, then pays the wages and (hopefully) changes their wandering ways. There are times when the employer is unable or unwilling to pay and then the agency or employees have to personally tackle the assets of the company and / or owners / managers. State governments are always looking for ways to get their money back for working people and Washington State has just taken another bold step in that direction.
On January 1, 2022, the Washington Wage Recovery Act (the “Act”) comes into force. This law provides that employees can seize a lien on the property of the employer for unpaid wages owed. The aim is to try and secure the payment of wages by placing the lien on the property and this can be done even before the wage claim is filed or if it is pending. As of ten days, a Washington state employer can receive notice of the lien filing even before receiving notice of the lawsuit or claim filed with the Department of Labor.
The law has a broad definition of the employer. Also included (and this is the trend) are indirect employers if the entities share some sort of business relationship, for example, to label the second entity as acting in the so-called “interest” of the direct employer. These secondary “employers” could include recruiting agencies, contractors, and suspected joint employers. The law does not specify whether personal liability is incurred if there is an allegation that the default was intentional.
Significantly, the law excludes vacation pay or severance pay claims. Someone could recover interest, as well as damages, attorney fees, and legal penalties. The ability for an individual, as opposed to the state’s DOL, to obtain damages for legal sanctions is also an unwarranted departure from traditional state laws, such as here in New Jersey. The law also excludes “highly paid employees” from its coverage. Interestingly, the law shortens the statute of limitations in this state, as the time limit is three years for a wage claim, but the wage lien is limited to only two years from when the wages would have been due to the employee. .
This is a dangerous development because it puts more pressure on employers to pay or settle wage claims, even though they may have no basis. If a lien is filed, it becomes a “stain” on the employer’s financial position and just doesn’t look good. Employees may be motivated to file or threaten to file such liens to compel payment of anything they claim is due. The best defense is to ensure that an employer’s compensation practices (no matter what state they are in) comply with the law. I believe in these self-audits a lot and have carried out dozens of them, reporting to the client in a sharp assessment, without legal jargon, of their compensation policies.
You know, an ounce of prevention …