$15 Minimum Wage Initiative Filed in Seattle

December 12, 2013

Despite Seattle mayor-elect Ed Murray’s hope that a $15 minimum wage would be decided by the Seattle City Council and not by voters, an initiative was filed today with the City of Seattle Clerk’s Office to establish new minimum wage rates.  In a twist, the initiative also would also lower the City’s Square Footage Business Tax and Business & Occupation Tax on employers.

Initiative 104 seeks to collect sufficient signatures to place the measure before the Seattle City Council for adoption.  Upon approval by the City Clerk of the ballot title, supporters will have 180 days to collect the required number of registered voter signatures, which is 10% of the total votes cast in the last mayoral election, so around 20,637 signatures.  If supporters submit enough valid signatures, the Council will then have 45 days to enact the provisions of the measure or place it on the ballot for voter approval sometime in 2014. 

The measure, set to go into effect on January 1, 2015 if passed, was filed by a group calling itself “$15in2014,” described on their website only as a “community non-profit organization” whose goal is to “gain and retain power for working people.”   Calls to the group were not returned by posting time, and no campaign reports have been filed with the state Public Disclosure Commission or the Seattle Ethics and Elections Commission detailing which individuals or organizations support the measure.

The 18 pages of Initiative 104’s text detail a complex and multi-layered plan to increase minimum wages and lower business taxes in Seattle.

MINIMUM WAGE

The initiative would create two categories of employers, with different minimum wage requirements for both.  Within each category there are different tiers of mandated minimum wages, based workers’ age and apprenticeship level.

Category 1 employers would include the City of Seattle, chain restaurants, chain retail stores, hospitality and transportation businesses, and sport and entertainment venues.  Category 1 employers would be required to pay a $15 per hour minimum wage to their employees.  

  • The initiative defines a “chain restaurant employer” as any restaurant, convenience store, deli, bakery, ice cream or coffee shop with two or more locations collectively doing at least $1 million in annual gross sales.  Locations outside of Seattle city limits are included in the tally.   
  • A “chain retail employer” is defined as stores ranging in size from 40,000 to 150,000 or more square feet with two or more locations in Washington State collectively doing at least $1 million in annual gross sales.  Again, locations outside city limits are counted.
  • A “hospitality employer” is any hotel with 100 or more rooms and 30 or more workers, or institutional food service or retail operations with 10 or more non-managerial workers.  Also included are businesses that contract with these employers doing work on those premises.
  • A “sports-entertainment facility employer” is any facility where sporting, recreation or entertainment events are presented for a price of admission.
  • A “transportation employer” is any business employing more than 25 workers and providing curbside passenger check check-in services; baggage check services; wheelchair escort services; baggage handling; cargo handling; rental luggage cart services; ground transportation management; any janitorial and custodial services, facility maintenance services, security services, or customer service performed in any place of business where any of these services are also performed.  Transportation employers are also businesses with 10 or more non-managerial workers that operate rental car services with a fleet or more than 25 cars, shuttle transportation with more than 10 vans or buses and parking lot operators with more than 50 parking spaces.

In a tacit acknowledgement that a high minimum wage hurts the employment prospects for unskilled workers or those just entering the workforce, a series of temporary sub-minimum training wages would be allowed for Category 1 employers to pay “learner” and “apprentice” employees. 

“Learner” employees age 16 and under would earn 75% of the $15 wage, ages 17-18 would earn 85% and 19-20 year olds would earn 95%.  The training wage could be paid for a maximum of six months. 

“Apprentice” employees would be paid a percentage based on their years in apprenticeship.  Workers in three-year apprenticeships would earn 75% in the first year, 87.5% in the second and 100% of the wage in the third year.  Those in four-year apprenticeships would earn 75% in the first year, 83.33% in the second, 91.66% in the third and 100% in the fourth year.  Certified apprenticeship programs would have no six-month limitation.

Category 2 employers would be all other employers not included in Category 1.  These employers would be required to pay a flat $1.35 over the state minimum wage.  For example, the state minimum wage in 2014 will be $9.32, so the mandated hourly wage for Category 2 Seattle employers would be $10.67 (for illustrative purposes only, I-104 would not take effect until 2015).  There would be no sub-minimum training wages for this category of employers.

The new minimum wages would include an Annual Cost of Living Increase based on the rate of inflation. 

One welcome provision in the measure is the inclusion of a tip credit. The new minimum wages would allow a credit for compensation received in the form of tips and gratuities as well as goods or services.  The tip credit would allow employers to pay 50% of the minimum wage specified by the initiative, as long as total compensation for the employee is at least the minimum wage.  So a Category 1 employer could pay their workers $7.50 per hour, as long as those workers earn at least an additional $7.50 in tips; a Category 2 employer could pay their workers half of whatever the state minimum wage plus $1.35 is, likely in the $10.80 range in 2015, for a tip credit wage of around $5.40.  And if an employee receives compensation in the form of goods or services, the employer must only pay the difference between the fair market value of the goods or services and the specified minimum wage.

And as typical for such minimum wage mandates, labor unions with collective bargaining agreements are exempt from the wage madates.

Enforcement of the new law would fall to the City, which would be required to adopt measures to monitor and ensure compliance.  The City would be tasked with determining procedures to audit employers, investigate complaints and levy penalties for violations (although some minimum penalties are specified by the initiative).   Employers would be required to maintain records documenting hours worked and wages and benefits paid to each employee for two years, with those records subject to review by the City. 

BUSINESS TAXES

Declaring that high business taxes “restrict growth,” Initiative 104 includes provisions to lower such taxes in order to “stimulate and sustain the economic environment for workers.”

The City’s current B&O tax rates would be halved and the threshold of gross income triggering the tax would be raised from $100,000 to $250,000 in the first year, and adjusted every year (increased or decreased) thereafter according to inflation. 

The burdensome Square Footage Business Tax, which levies a tax on every square foot of business and “other” floor space leased, owned or occupied, would also be reduced by half.

While any effort to reduce the business tax burden should be applauded, any gain from such reductions would be overshadowed by the costly new wages.  Simply including the tax cuts does not negate the anti-business nature of this measure.

A recent poll by Wall Street Journal/NBC News shows that only 28% of Americans support an increase in the minimum wage to $15 per hour.  And an online poll of Seattle Times readers last week showed just 32% support such a wage hike.  It will be interesting to see how many Seattle voters will support Initiative 104.