By Emily A. Bushaw and Jasmine Hui

Governor Jay Inslee recently signed the Washington Wage Recovery Act (WRA) allowing employees to place a lien on their employers’ property to secure unpaid wages. You should become familiar with the new statute before it goes into effect on January 1, 2022.

What Changes

Washington joins several other states with broad wage lien provisions, including Indiana, Maryland, Tennessee, and Wisconsin. The WRA’s purpose is to provide employees with another tool to secure their unpaid wages.

Currently, Washington employees must wait until the resolution of a civil demand or lawsuit or a government agency investigation to receive payment of unpaid wages. With the WRA, they can now hold a security interest in their employers’ property while they wait for resolution.

Scope of Wage Claims Subject to Liens

Under the WRA, employees can obtain a wage lien on claims for any unpaid wages and other compensation, including “interest, statutory damages, liquidated damages, attorneys’ fees and costs, or statutory penalties that may be owed for violation of a local, state, or federal wage law.”

Employees cannot obtain a wage lien, however, based on claims for “vacation or severance pay, contributions to an employee benefit plan, or paid leave except paid leave that is statutorily mandated.”

Employees Eligible to Obtain Wage Liens

Because the WRA broadly defines “employee” as “any individual currently or formerly employed by an employer,” many workers will now have the ability to file a wage lien against their employers. Highly compensated employees, however, may not establish a wage lien, including:

• Any employee who was a five percent owner of the business at which she is employed during the current or preceding year; or
• Any employee who has received compensation from the employer in excess of the indexed compensation established by the U.S. Treasury Department. The threshold will change annually. The 2021 indexed compensation is $130,000.

Types of Property Subject to Wage Liens

A wage lien can be placed on property owned or subsequently acquired by the employer, including:

• Real property in the state;
• Goods and tangible chattel paper (i.e., records establishing a monetary obligation or security interests) in the state; and
• Accounts and payment intangibles.

Only property in the state of Washington can be subject to a lien, but employers or property owners don’t need to be located in the state for the lien to attach.

Importantly, for willful violations, property can include the real property and personal property of any officer, vice principal, or agent. The lien also could apply to the property of those individuals’ spouses, domestic partners, and heirs.

Under the WRA, certain limitations to wage liens apply, including claims subject to a lien under Washington’s construction lien statutes. Additionally, wage liens cannot attach to the personal or real property of the state or other public entities.

Requirements for Recording Wage Lien

The WRA establishes specific procedures for recording wage liens, which must be filed within two years from the date the wages were first due:

• For wage liens on real property, a claimant must file a notice in the county where the property is located, pay a filing fee, and mail a copy of the notice to the employer and property owner.
• For wage liens on personal property and goods, the individual must file a notice with the Washington Department of Licensing, pay a filing fee, and mail a copy of the notice to the employer.

Actions on wage claims must be filed within eight months of recording the lien, or they will be extinguished.

A wage lien won’t be effective against good-faith buyers or acquirers of goods, personal property, or real property if the buyer or acquirer obtains the property before the filing of the wage lien in good faith, for value, and without actual notice or knowledge of the lien.

How to Challenge Wage Lien

If an owner or employer believes the wage claim is frivolous and made without reasonable cause or is clearly excessive, it can file a request with the court to direct the employee to appear and show cause why the requested relief should not be granted. The employee can be required to appear for a hearing no earlier than 6 days and no later than 15 days from the date of the request’s service.

After a hearing, the court will issue an order releasing, reducing, or verifying the lien’s validity. The prevailing party is entitled to attorneys’ fees and costs.

Final Notes

Notably, under the WRA, you can’t require employees to waive their rights to obtain a wage lien in any employment contracts or agreements. The new law has specific provisions setting out the procedures on how to foreclose on a lien, the priority a wage lien is given over other types of liens, and form notices for wage liens.

Emily A. Bushaw and Jasmine Hui are attorneys with Perkins Coie LLP in Seattle, Washington. Bushaw focuses on employment litigation, arbitration, and counseling. Known for resolving issues efficiently, her extensive experience includes defense of discrimination, harassment, retaliation claims, wage and hour class actions, whistleblower, trade secret, and noncompetition claims. Hui focuses on counseling clients on best employment practices and defending local, national, and international employers. She has defended employers in various employment litigation claims, including class action lawsuits, single-plaintiff discrimination claims, and wage and hour claims. You can reach them at ebushaw@perkinscoie.com and jhui@perkinscoie.com.