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New Washington State Lien Law Increases Pressure On Employers To Pay Wage Claims: What’s Next? | Fox Rothschild LLP

When the DOL audits an employer and finds wages due, the employer, albeit unhappily, then pays the wages and (hopefully) changes its errant ways. There are times when the employer cannot or will not pay and then the agency or the employees need to go after the assets of the Company and/or owners/officers personally. State governments are always looking for ways to get workers their money and the State of Washington has just taken a new, bold step in that direction.

On January 1, 2022, the Washington Wage Recovery Act ( “Act”) becomes effective. This law provides that employees can attach a lien on employer property for unpaid wages owed. The goal is to try to secure payment of the wages by placing the lien on the property and this may be effected even prior to the wage claim being filed or if it is pending. Starting in ten days, an employer in Washington State may receive notice of the lien being filed even prior to it getting notice of the lawsuit or claim filed with the Department of Labor.

The law has an expansive definition of employer. Also included (and this is the trend) are indirect employers if the entities share some kind of commercial, business relationship, such as to label the second entity as acting in the so-called “interest of” the direct employer. Such secondary “employers” might include staffing agencies, subcontractors, and alleged joint employers. The law does not address whether personal liability attaches if there is a contention that the failure to pay was willful.

Significantly, the law excludes vacation pay or severance claims. Someone could recover interest, as well as liquidated damages, attorney fees and statutory penalties. The ability for an individual, as opposed to the state DOL, to secure damages for statutory penalties is also an unwarranted departure from traditional state law(s), like here in New Jersey. The law also excludes “highly compensated employees” from its coverage. Interestingly, the law shortens the statute of limitations in this State, as the statute is three years for a wage claim but the wage lien is confined to only two years from when the wages were allegedly owed to the employee.

The Takeaway

This is a dangerous development because it puts more pressure on employers to pay or settle wage claims, even though they may have no merit. If a lien is filed, it becomes a “stain” on the employer’s financial posture and just does not look good. Employees may be motivated to file or threaten to file such liens to compel payment of anything they claim they are owed. The best defense is to ensure that an employer’s compensation practices (in whatever State they are situate) are compliant with the law. I am a big believer in these self-audits and have conducted dozens of them, reporting back to the client in a bullet pointed, no legalese, assessment of their compensation policies.

You know, an ounce of prevention…

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