SeaTac $15 Minimum Wage Vote Casts Shadow Over Usual Labor-Versus-Business Battle

Jeff Johnson, president of the state Labor Council, leads the discussion last Thursday at a news conference on the labor agenda.

Jeff Johnson, president of the state Labor Council, leads the discussion last Thursday at a news conference on the labor agenda.

OLYMPIA, Jan. 18.—The eternal battle between business and labor looks a little different this year as a remarkable vote for a $15 minimum wage in the city of SeaTac casts a long shadow over the statehouse. Labor is pushing a $12 statewide minimum wage — a dramatic increase for a state that already has the highest minimum wage in the country at $9.32.

Meanwhile, business is taking a different lesson from the vote. It will push in the opposite direction, with a bill that draws the line – no more SeaTacs.

And so the annual scrimmage between business organizations and labor groups takes on a somewhat different flavor than in previous years. Both sides will be pushing bills that ought to be familiar to anyone who has been watching the fray in recent years, on issues like workers’ comp and independent contracting. But the big rallying point this time out is the first-of-its-kind vote in SeaTac last November and labor’s city-by-city effort to ratchet up workplace standards. While labor seeks to extend local successes statewide, business wants a bill to block local ordinances that go beyond state law.

Biggest question is whether any of the bills will get anywhere. Control of the Legislature is divided between a labor-friendly House Democratic Caucus and a largely Republican bipartisan coalition in the Senate that is substantially more sympathetic to business. Meaning it will take big dealmaking to get anything through. About the only big-picture on which business and labor seem to agree is that the Legislature ought to pass a gas-tax increase for road construction – which would mean a smoother flow for commerce and a shot in the arm for contractors and construction workers. But that battle is being fought at a higher level, between the House and Senate majorities, over transportation-reform issues – and there is no telling whether they will strike an agreement this year.

Labor Has ‘Shared Prosperity Agenda’

Labor is tying together its big bills of the session with a statement of theme – it calls its effort the ‘Shared Prosperity Agenda.’ The push for a minimum-wage increase has been given a bit of oomph by Gov. Jay Inslee, who called for a hike of between $1.50 and $2.50 in his State of the State address. But at a news conference last week, Jeff Johnson, president of the Washington State Labor Council, said the governor doesn’t go far enough. Labor would prefer a wage of at least $12, to be phased in over two years.

Labor’s pitch is a reflection of the progressive argument that the biggest problem facing the state and society as a whole is “income inequality,” a growing gap between rich and poor. Johnson reminded reporters that lawmakers responded quickly to the call for tax breaks to keep Boeing Co. from building its 777X production line in another state. “Two months ago they came together and they addressed the challenge that Boeing put out there. Boeing posited that the aerospace industry was in crisis, that they needed things, and swiftly, within 2 ½ days, the Legislature swung open the doors of the government pantry and swept all the goodies off the shelves into Boeing’s bag, and it was done. Well, what we’re challenging the Legislature to do this session is to face the challenge of an even bigger crisis out there, which is the crisis of inequality.”

But there is a big difference between the Boeing tax breaks and the current effort. When lawmakers extended tax breaks worth $8.7 billion, they weren’t dealing in real money, because the cash never would have materialized if the jetmaker had gone elsewhere. In this case, someone actually pays, and it’s not state government.  Money would come from employers, at the expense of the bottom line. There lies the nub of this year’s debate – can business afford it?

In addition to the minimum-wage increase, labor seeks a statewide mandate that employers provide paid sick leave. A sick leave requirement also was included in the SeaTac initiative, a point that is frequently overlooked, but more importantly the city of Seattle imposed a similar sick-leave rule by ordinance in 2012. No fair that some businesses have to provide it and some employers don’t, the Labor Council argues, and now that the state’s largest city imposes the rule it says a statewide mandate would “ensure all employers compete on a level playing field.” Paid sick leave would make it easier for workers to take time off for personal illness or a sickness in the family, it says. But two out of five Washington workers don’t get it, usually the lowest-paid workers who can least afford a disruption in income. Meaning they come to work sick.

Other elements of the labor agenda include restrictions on employer usage of independent contractors and on their ability to shunt workers to the state health exchange rather than providing health insurance of their own.

Says Kris Tefft of the Association of Washington Business, “You know, labor calls this a shared prosperity and job creation agenda, but we don’t see a lot of job creation here. And we would suggest that if the Legislature wants to really explore how to create jobs, it should be talking to small business owners in our state, not to labor lobbyists. I think that if you ask most small business owners, they would suggest that putting into law more ways to take them to court, restricting their ability to do business with service providers, telling them how to run their employee benefit programs, and telling them to raise the wages they pay folks without regard to the skills necessary to do jobs at the entry level is not a job-creation agenda.”

An Oldie but Goodie

Kris Tefft of the Association of Washington Business.

Kris Tefft of the Association of Washington Business.

The independent-contractor battle deserves special attention: It is a renewal of a battle that has been waged in the Legislature for years. The issue has a big impact on employer profitability, because when a worker is classified as an employee, a business must pay payroll taxes and adhere to other workplace rules. Though some rules already apply in this area, labor says they don’t go far enough. And the very words it uses to frame the debate at the statehouse tell you what it thinks about the matter. Labor calls it worker “misclassification,” “wage theft” and “workplace fraud.”  

During the Capitol-building news conference, Johnson said employers frequently require workers to obtain master business licenses so that they are not considered employees — a matter of coercion and intimidation. “Take the carpet industry, for example. When we come into the Columbia Room here — all of a sudden there are four independent contractors laying down new carpet here. What are the odds that would actually happen? So we have a long way to go to create fairness in the system.”

Labor bills this year would tighten the state’s definitions for independent contractors, prohibit retaliation against employees who protest, and allow workers to seek treble damages.

There’s nothing really new about the argument, Tefft says. There are legitimate reasons for business to use contractors, but the new definitions and legal requirements advocated by labor would create a “mashed up series of factors” that would tip the balance to its side. “This is billed as a way of rooting out the underground economy,” he says. “But really it is about making it harder to do work with independent contractors and making more people employees, and therefore making them subject to the various payroll taxes, employment laws , workers’ comp, unemployment insurance, anti-discrimination laws, and very prominently, the possibility of organizing [workers] into labor union membership.”

‘No More SeaTacs’

Other bills this session demonstrate that for every action there is a reaction. Republicans in House and Senate are introducing measures that would make it easier for workers to certify themselves as independent contractors. And as labor pushes one way on the minimum wage and mandatory sick leave, business is pushing back.

AWB is backing a bill, to be introduced shortly, that would preempt local ordinances on wages, hours and workplace rules. Cities and other local governments could not go beyond state law. The no-more-SeaTacs bill also could put a spike through a burgeoning Seattle campaign to boost the minimum wage in that city. Business has trouble thriving under a regulatory patchwork and the uncertainties of local politics, Tefft says. But statewide preemption also would force labor-standards issues to be debated in a Legislature where business interests might wield more influence.

Then there’s the big enchilada – workers’ comp reform, a debate that has been simmering ever since the Legislature passed modest reforms to the state-run industrial-insurance program in 2011. Nearly all states allow workers to settle claims for lump sums in lieu of pensions, a practice that gives workers flexibility while reducing employer costs. But due to strong labor opposition, Washington state took only a baby-step in that direction, limiting settlements to older workers, requiring “structured” payouts, and requiring the state Board of Industrial Insurance Appeals to second-guess settlement agreements. The result has been a disappointment. Savings so far have run hundreds of millions of dollars short of the state’s projections. Count on a renewed effort from business to ease some of the restrictions, a move that could ease some of the pressure for future workers’ comp rate increases.

“That program was the centerpiece in terms of cost savings of the 2011 reforms, and as one might have  predicted with all the political baggage weighing it down, it has been completely underwhelming,” Tefft says. “In terms of settlements that were supposed to have occurred now, two full years into the program, we have had 800 applications and just 79 approved. Yet even those 79 approved have saved the workers comp system an estimated $100 million in foregone liabilities. Imagine what a robust settlement option as exists across the country could do, in terms of saving costs in our workers comp system.”

Just don’t hold your breath waiting for such a bill to pass. A workers’ comp measure cleared the Senate last year after much furor but vanished without notice in the House. The political dynamics haven’t changed, Tefft notes, and that may be the fate of many a business and labor bill again this session.