Washington Workplace Law

Clients occasionally ask us questions about employee garnishment notices. A wage garnishment is the process of deducting money from an employee’s wages, usually as a result of a court order. Garnishments may be obtained for a variety of legal issues, including credit collection, child support, defaulted student loans, taxes, or unpaid court fines.

Washington law recognizes that garnishment of wages, funds or other property “is necessary for the enforcement of obligations of debtors.” RCW 6.27.005. In general, wage garnishments may be served on the garnishee (i.e., the employer) in most cases by certified mail. RCW 6.27.110. But, proper service of a writ of garnishment on the State or a local government requires service in the same manner as in other civil suits. RCW 6.27.040. That means personal service of the writ, not mailed service, may be required for garnishments directed at State or local government employers. Note, if the creditor is the state or federal government, the rules may differ. Be sure to check the creditor’s authority and required process before implementing a wage garnishment.

If you have questions about a garnishment order or other employee compensation issue, please contact the Foster Pepper Employment and Labor Relations Group.

The Washington Department of Labor and Industries (L&I) has announced a hike in minimum wage from $9.03 to $9.19, effective January 1, 2013.  The $.16 increase reflects the state’s higher cost of living as calculated by the Consumer Price Index. Washington will continue to have the highest minimum wage in the country, followed by Oregon at $8.95 per hour.

Washington’s minimum wage applies to workers in both agricultural and non-agricultural jobs, although 14- and 15-year-olds may be paid 85% of the minimum wage.

Washington employers are required to post the “Your Rights As A Worker” poster in designated workplace areas. The poster, which provides information about the minimum wage and other topics, are available on the L&I website. Employers do not need a new posting with the minimum wage increase, but should check to ensure that current postings are up to date.

For history buffs, L&I released a history of the minimum wage in Washington, beginning with $1.15 in 1961.

For more information on Washington wage requirements or related employment issues, please contact the Foster Pepper Employment & Labor Relations Practice Group.

In an article posted earlier this week, we wrote about the Washington Supreme Court’s new test for determining whether a worker is an employee entitled to minimum wage and overtime, or an independent contractor entitled only to compensation set by the parties. The article described the "economic-dependence test" in general terms: the worker is an employee if "as a matter of economic reality," the individual "is economically dependent upon the alleged employer or is instead in business for himself." Anfinson v. FedEx Ground Package Sys., Inc.

The article noted that the Court did not list the factors it would apply to the economic-dependence test, or suggest how to flesh out the general outlines of the test, but merely referred in passing to "competing lists of nonexclusive factors" that some federal courts use. Finally, the article warned that other courts and agencies have different factors for determining whether a worker is an employee or independent contractor.

In this post we will detail the factors used by the federal courts cited in the Anfinson decision, as well as the factors applied under other laws.

Cases cited in Anfinson

In supporting its economic-dependence test, the Supreme Court mentioned "competing lists of nonexclusive factors" that some federal courts use, citing Hopkins v. Cornerstone Am., 545 F.3d 338, 343 (5th Cir. 2008) and Real v. Driscoll Strawberry Assocs., 603 F.2d 748, 754 (9th Cir. 1979).

Hopkins applied these "non-exhaustive" factors:

(1) the degree of control exercised by the alleged employer;

(2) the extent of the relative investments of the worker and the alleged employer;

(3) the degree to which the worker's opportunity for profit or loss is determined by the alleged employer;

(4) the skill and initiative required in performing the job; and

(5) the permanency of the relationship.

Real applied these factors:

(1) the degree of the alleged employer's right to control the manner in which the work is to be performed;

(2) the alleged employee's opportunity for profit or loss depending upon his managerial skill;

(3) the alleged employee's investment in equipment or materials required for his task, or his employment of helpers;

(4) whether the service rendered requires a special skill;

(5) the degree of permanence of the working relationship; and

(6) whether the service rendered is an integral part of the alleged employer's business.

Other formulations

The Anfinson case applies only to the Washington Minimum Wage Act. Courts and agencies apply different formulations for different laws. Therefore, a worker could be considered either an employee or an independent contractor depending on the law or agency. For example, a worker who qualifies as an independent contractor for federal income tax purposes may be entitled to overtime pay as an employee under the Washington Minimum Wage Act.

A few of those formulations, along with links to source materials, follow below:

United States Department of Labor (applying the federal Fair Labor Standards Act, governing minimum wage and overtime):

(1) The extent to which the services rendered are an integral part of the principal's business.

(2) The permanency of the relationship.

(3) The amount of the alleged contractor's investment in facilities and equipment.

(4) The nature and degree of control by the principal.

(5) The alleged contractor's opportunities for profit and loss.

(6) The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.

(7) The degree of independent business organization and operation.

Washington Department of Labor and Industries (covering workers compensation and safety requirements):

(1) Are you hiring someone for more than personal labor? ["Yes" answers tend to favor an independent contractor relationship.]

• Are they bringing employees?

• Are they bringing heavy equipment?

(2) Are you supervising?

• You ARE NOT supervising if you are only scheduling and inspecting the work.

• You ARE supervising if you are telling your worker or a subcontractor’s workers how to do the job, assigning tasks, training, keeping time sheets, paying a wage or setting regular hours.

(3) Do they have an established business of their own? ["Yes" answers tend to favor an independent contractor relationship.]

• Supervision: Does the worker perform work free of your direction and control?

• Separate business: Does worker offer services that are different from what you provide? Or, does the worker maintain and pay for a place of business that is separate from yours? Or, does the worker perform service in a location that is separate from your business or job sites?

• Previously established business: Does the worker have an established, independent business that existed before you hired?

• IRS taxes: When you entered into the contract, was this person responsible for filing a tax return with the IRS for his or her business?

• Required registrations: Is the worker up-to-date on required Washington State business registrations?

• Maintains books: Does the worker maintain his or her own set of books dedicated to the expenses and earnings of the business?

• Construction trades: If the work performed is in the construction trades, does the worker have an active contractor registration or electrical contractor’s license?

Internal Revenue Service (covering federal income tax responsibilities):

The IRS traditionally applied a 20 factor test enunciated in a 1987 revenue ruling. The IRS since has modified its analysis to cover three factors and a number of sub-factors. They are:

(1) Behavioral: Does the company control or have the right to control what the worker does and how the worker does the job? [These factors tend to favor an employment relationship]

• Type of instructions given (when and where to do the work; what tools or equipment to use; what workers to hire or to assist with the work; where to purchase supplies and services; what work must be performed by a specified individual; what order or sequence to follow when performing the work)

• Degree of instruction (the more detailed the instructions, the more control the business exercises over the worker)

• Evaluation system (measures the details of how the work is performed)

• Training (training on how to do the job, and periodic or on-going training about procedures and methods)

(2) Financial: Are the business aspects of the worker’s job controlled by the payer (such as how the worker is paid, whether expenses are reimbursed, and who provides tools/supplies)? [These factors tend to favor an independent contractor relationship.]

• Worker’s significant investment in equipment

• Unreimbursed expenses

• Opportunity for profit or loss

• Services available to the market (rather than just to one enterprise)

• Method of payment (e.g., flat fee)

(3) Type of Relationship: Are there written contracts or employee type benefits (such as pension plan, insurance, or vacation pay)? Will the relationship continue, and is the work performed a key aspect of the business?

• Written contracts (not controlling)

• Employee benefits (tend to show employee status)

• Permanency of the relationship (indefinite engagement tends to show employer-employee relationship)

• Services provided as key activity of the business (if worker’s services are a key aspect of the business, it’s more likely an employment relationship)

The IRS uses Form SS-8 in determining whether the worker is an employee or independent contractor for federal income tax purposes.

Equal Employment Opportunity Commission (covering federal anti-discrimination law, including Title VII of the Civil Rights Act of 1964, list below found at note 67):

(1) The employer has the right to control when, where, and how the worker performs the job.

(2) The work does not require a high level of skill or expertise.

(3) The employer furnishes the tools, materials, and equipment.

(4) The work is performed on the employer's premises.

(5) There is a continuing relationship between the worker and the employer.

(6) The employer has the right to assign additional projects to the worker.

(7) The employer sets the hours of work and the duration of the job.

(8) The worker is paid by the hour, week, or month rather than the agreed cost of performing a particular job.

(9) The worker does not hire and pay assistants.

(10) The work performed by the worker is part of the regular business of the employer.

(11) The employer is in business.

(12) The worker is not engaged in his/her own distinct occupation or business.

(13) The employer provides the worker with benefits such as insurance, leave, or workers' compensation.

(14) The worker is considered an employee of the employer for tax purposes (i.e., the employer withholds federal, state, and Social Security taxes).

(15) The employer can discharge the worker.

(16) The worker and the employer believe that they are creating an employer- employee relationship.

This list is not exhaustive. Other aspects of the relationship between the parties may affect the determination of whether an employer-employee relationship exists. Furthermore, not all or even a majority of the listed criteria need be met. Rather, the determination must be based on all of the circumstances in the relationship between the parties, regardless of whether the parties refer to it as an employee or as an independent contractor relationship.

Washington Common Law (covering the responsibility of the principal for the negligence of agents):

(1) the extent of control which, by the agreement, the principal may exercise over the details of the work;

(2) whether or not the worker is engaged in a distinct occupation or business;

(3) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of an employer or by a specialist without supervision;

(4) the skill required in the particular occupation;

(5) whether the principal or the worker supplies the instrumentalities, tools, and the place of work:

(6) the length of time for which the worker is engaged;

(7) the method of payment, whether by the time or by the job;

(8) whether or not the work is a part of the regular business of the principal;

(9) whether or not the parties believe they are creating the relation of principal and agent; and

(10) whether the principal is or is not in business.

Hollingbery v. Dunn, 68 Wash.2d 75, 79-80 (1966).

Conclusion

The conflicting standards imposed by various courts and agencies make it difficult for businesses, non-profits and government entities to determine whether the people engaged to provide services are employees or independent contractors.  Foster Pepper’s Employment and Labor Relations attorneys can assist.

In a case with potentially sweeping impact on many Washington enterprises, the Washington Supreme Court announced a new test for determining whether a worker is an employee entitled to minimum wage and overtime, or an independent contractor entitled only to compensation set by the parties. Under the “economic-dependence test,” the worker is an employee if "as a matter of economic reality,” the individual “is economically dependent upon the alleged employer or is instead in business for himself.” Anfinson v. FedEx Ground Package Sys., Inc. (click for separate majority opinion and dissent)

Although the full consequences of the July 19 decision are not yet clear, many workers who have been treated as independent contractors may now have the right to minimum wage and overtime compensation, and businesses and government agencies can expect a flurry of new lawsuits, including class actions.

The Lawsuit

Randy Anfinson, a delivery driver for FedEx Ground, was engaged as an independent contractor. Along with two other drivers, Anfinson filed a class action lawsuit seeking overtime wages under the Washington Minimum Wage Act. The case was certified as a class action that covered 320 current and former drivers.

After a four week trial, the jury found that the workers were independent contractors and therefore not entitled to overtime pay. The plaintiffs appealed. The Court of Appeals and Supreme Court found the jury instructions to be erroneous and prejudicial, and sent the case back for a new trial.

The Supreme Court’s Analysis

The Supreme Court rejected an eight-factor “right to control test” that formed the basis of the jury instructions. Under this test, the main issue was whether the enterprise controlled, or had the right to control, the details of the worker’s performance, and the eight factors were relevant only in deciding control or right to control.

According to the Supreme Court, the correct inquiry is "whether, as a matter of economic reality, the worker is economically dependent upon the alleged employer or is instead in business for himself.” Unfortunately, the Court did not list the factors it would apply to the economic-dependence test, or suggest how to flesh out the general outlines of the test. The Court referred obliquely to "competing lists of nonexclusive factors" that some federal courts use.

The dissenting Supreme Court justices objected to the absence of a definite set of factors. They wrote that employee status under the Minimum Wage Act now is governed by a single determination – whether the worker is economically dependent upon the alleged employer – and any other factor will be relevant only in deciding economic dependence. The dissenting justices concluded that economic dependence focus potentially sweeps in almost any work done by one person on behalf of another.

For its part, the majority acknowledged that the economic-dependence test will result in “a more inclusive definition of employee than does the right-to-control test.” In other words, more workers will be considered employees under the economic-dependence test than under the right-to-control test.

Competing Standards

Unfortunately, the determination in the Anfinson case applies only to the Washington Minimum Wage Act. Courts and agencies, such as the Internal Revenue Service, the Washington Department of Labor and Industries, and the Equal Employment Opportunity Commission, apply different formulations. Therefore, a worker could be considered either an employee or an independent contractor depending on the law or agency. For example, a worker who qualifies as an independent contractor for federal income tax purposes might be entitled to overtime pay as an employee under the Washington Minimum Wage Act.

Conclusion

As noted above, the consequences of the Anfinson decision remains to be seen. We will continue to cover developments on the Washington Workplace Law blog.  If you have a question about avoiding liability for misclassifying employees as independent contractors, please contact the Foster Pepper Employment and Labor Relations group.

The Seattle City Council's Housing, Human Services, Health and Culture Committee has spent much of the summer working on revisions to a proposed ordinance that would require Seattle businesses to provide employees with "paid sick and paid safe time." As we previously discussed, if the ordinance is adopted, Seattle would join San Francisco, Milwaukee, and Washington D.C. as one of the few cities to require "paid sick and paid safe time."

Since June, the Committee has made several revisions to the proposed ordinance to make it friendlier to Seattle's businesses, including:

• Exempting businesses with fewer than 4 full-time employees ("micro employers") from the ordinance's requirements;

• Excluding college students on work study, even if they would otherwise qualify for "paid sick and paid safe time";

• Increasing the minimum eligibility requirement for employees who occasionally work in Seattle from 80 to 120 days per year to qualify for "paid sick and paid safe time"; and

• Enlarging the probationary period for employees at the largest businesses (250+ employees) from 90 to 180 days worked before any paid sick time may be used.

Despite these and other revisions, the legislation continues to be controversial with the Seattle business community. While some businesses have supported the measure, the Seattle Chamber of Commerce is urging its members to tell Seattle City Councilmembers to "slow down," "take more time" and "don't rush to mandate." The Chamber suggests that the City Council should more fully consider the impact of the leave ordinance on collective bargaining agreements, the impact on seasonal employment, and whether alternatives exist that wouldn't cause financial hardship for employers.

Despite this opposition, the ordinance is expected to be enacted in its current form on September 12.

For more information on the proposed ordinance and how it might affect your business, please contact Foster Pepper's Employment and Labor Relations Practice Group. We'll also discuss the outcome of the vote at our September 13th briefing.

Now that summer is here, many workplaces find new faces in the hallways: students eager for work experience. Some are willing to donate their time to gain practical experience, others wish to support a worthy organization, and still others are focused on adding to their resume. But can the organization accept the efforts of these students without paying them?

Do we have to pay our summer interns?

As a general rule, the organization must pay all persons it “employs,” which is broadly defined to mean “suffer or permit to work.”

Nonprofits and public sector organizations usually are permitted to offer unpaid internships, even if the intern provides services of value to the organization.

The situation with for-profit entities is different. The company first must determine whether the intern is participating in a training program (and therefore not entitled to compensation) or is simply “employed.” Before permitting unpaid interns or trainees, the US Department of Labor requires the company to meet the following criteria:

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;

2. The internship experience is for the benefit of the intern;

3. The intern does not displace regular employees, but works under close supervision of existing staff;

4. The employer that provides the training derives no immediate advantage from the activities of the intern, and on occasion its operations may actually be impeded;

5. The intern is not necessarily entitled to a job at the conclusion of the internship; and

6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If the company fails to satisfy any one of these requirements, the worker is considered an employee and must be paid at least minimum wage.

Do we have to pay our volunteers?

Nonprofit and public sector organizations may have volunteers as long as the volunteers are not employees of the organization and give time and services gratuitously. There can’t be any pressure or coercion to donate time, and all services must be free and voluntary.

For-profit companies cannot have volunteers. Companies must pay at least minimum wage to anyone who is permitted to work.

The US Department of Labor has offered guidance on volunteers, and the Washington Department of Labor & Industries has even more complete information.

Can we encourage our employees to volunteer their time, either to our organization or to other organizations?

It depends. Of course all volunteers must give their time freely, and they can’t be coerced or forced to participate.

A non-profit employer need not pay employees for volunteer activities so long as the volunteers perform duties that are not similar to their paid job and the employer doesn’t control the activity. However, if the employer requires or controls the volunteer work, and the activities benefit the employer, the employer may need to pay for time spent on the activities. Also, if employees on their own volition perform volunteer activities that are related to their job, and the employer knew or should have known that the employees would be participating, the employer may be required to pay for the time. For example, a charity can’t require or allow a bookkeeper to voluntarily process payroll, if that is the kind of work that he completes in his paid position. However, if the bookkeeper decides on his own to hand out t-shirts at the annual 5K race, he probably would not have to be paid.

According to the Department of Labor, public sector employees can’t volunteer to do work that is similar to their paid job within the same jurisdiction where they work, although they may volunteer to do similar work in different jurisdictions or different kinds of work in the same jurisdiction.  For example, a bus driver for the Auburn public schools could not volunteer to drive an extra shift at her elementary school for no pay. However, she could donate her time to drive for a class trip in the SeaTac schools. Or, if the driver prefers to spend her free time closer to home, the Auburn schools would not be obligated to pay her for volunteering to help restore a playground.

Private sector employees can volunteer in nonprofit and public sector in jobs that are similar to the work that they are paid to do in the business world. For-profit companies can never have volunteers doing company work without pay.

Can we give our unpaid interns and volunteers gift cards or stipends?

Yes. Volunteers and unpaid interns for nonprofit or public sector organizations can receive stipends or other nominal fees or gifts, as long as the gifts are not tied to productivity. Monthly or yearly stipends are fine, too, as are reimbursements for expenses.

However there is a limit.  If volunteers are paid more than a reimbursement for expenses, reasonable benefits or a nominal fee, the nonprofit might start to establish an employment relationship with the volunteer that would be subject to minimum wage requirements. The Department of Labor has defined “nominal fee” as 20% or less of what an employee doing the same work would make. For example, a custodian who serves as a coach for the varsity track team can receive a stipend for his work without losing volunteer status, as long as the stipend is 20% or less of what the school would have to pay an employee to do the same work.  Note also that employers also may need to withhold taxes for stipends that exceed $600.

If you have questions about paying interns or volunteers, please contact our Employment and Labor Relations attorneys.

Boeing 787 Assembly Line Hearing Set For June 14: The Wall Street Journal highlights the latest political skirmish related to the Boeing labor fight.  An administrative law judge will hear arguments related to the NLRB's complaint on June 14 in Seattle. 

Seattle Strengthens Wage Theft Law: The City of Seattle has passed a bill to strengthen penalties for individuals who commit wage theft (i.e., intentionally withholding wages from workers).  Among other things, the new ordinance allows the City to revoke or refuse to renew business licenses from employers found guilty of wage theft.  The ordinance will be effective in the next 30 days.   

Beat the Heat: The Outdoor Heat Exposure Rule applies to Washington employers from May 1 to September 30 each year.  Employers with employees who work outdoors and are exposed to high temperatures must provide training for workers and actively encourage workers to stay hydrated.  The Department of Labor and Industries' website provides training modules and related background information. 

The federal Fair Labor Standards Act (FLSA) establishes complex regulations governing minimum wage and overtime pay. Like many other employment laws, FLSA has an anti-retaliation provision that forbids employers “to discharge or in any other manner discriminate against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to [FLSA].”

In a recent decision, Kasten v. Saint-Gobain Performance Plastics Corp., the Supreme Court found that the term “filed any complaint” includes oral as well as written complaints, and thus clarifying that employees who make verbal complaints of federal wage and hour violations are protected against retaliation.

Kasten repeatedly complained that the company was violating FLSA through its placement of time clocks. According to Kasten, the location prevented workers from receiving pay for time spent putting on and taking off work clothes – in FLSA parlance, “donning and doffing.” Kasten was persistent, reporting his concerns to his lead operator, shift supervisor, and two HR employees. In each case, however, the complaints were verbal.

Kasten later was fired. In his lawsuit, he alleged that the company discharged him because of his complaints. The company disagreed. It explained that Kasten made no significant complaint about the time clock location and that it discharged him because he failed to punch in and out.

The lower courts did not try to reconcile the two accounts, ruling simply that FLSA does not protect oral complainants against retaliation. The Supreme Court disagreed, sending the case back to the trial court to determine whether the company had adequate notice of the complaints and whether the discharge was retaliatory or justified.

The Kasten decision offers two reminders for employers.

First, employers should not ignore or minimize complaints of alleged illegal or improper treatment of employees, whether based on FLSA or other laws. Instead, each complaint – written or oral, formal or informal – should be reported to HR, reduced to writing, and given careful consideration. Depending upon the circumstances, an internal investigation might be prudent. Naturally, the employer should create documentation showing its thoughtful and respectful consideration of the complaint.

Second, once it receives a complaint, the employer should carefully consider any discipline of the complainant in light of a possible retaliation lawsuit. If possible, the employer should have full documentation of the facts and of its justification for the decision, justification that is independent of the complaint.

The treatment of workplace complaints and the discipline of complaining employees present complex issues. Sound advice from an employment lawyer can help to lower the risk of a lawsuit.  If you have any questions about the information in this posting please contact the Foster Pepper Employment and Labor Relations Practice Group.