State Attorney General Bob Ferguson is not happy with the fact that businesses in SeaTac and Seattle are complying with the respective cities’ $15 minimum wage law by adding a visible surcharge to their customers’ bills revealing the cost of covering the higher mandated wages. The added surcharge improves transparency by allowing customers to see why prices have increased. It’s that transparency that Ferguson appears to have a problem with. The Washington Policy Center,
“State Attorney General Bob Ferguson has issued regulations directing business how to charge customers and how they must spend money collected through the minimum wage surcharge.
“The Attorney General says business owners:
- Must disclose the surcharge;
- Must make the disclosure clear and easy to understand;
- May not characterize the surcharge as a tax or government mandate; and
- Must use the funds to pay the salary costs mandated by the $15 wage law”
The first two regulations are not an issue. After all, businesses want to ensure that customers know they are “adding the surcharge as a result of the new wage laws, not simply to pad their own profit.” It’s the last two regulations the present serious problems to basic freedoms.
The third rule is very likely a violation of free speech. The reality is that the $15 minimum wage is a government mandate. And, the surcharge is a result of that government mandate. The Washington Policy Center,
“Just because the government does not require employers to charge customers a surcharge to cover the cost of the $15 minimum wage mandate does not mean employers are being deceptive when they do. Actually, they are just being honest: “You see a surcharge on your bill because of the $15 minimum wage law.” That is not only a normal use of free speech as a basic civil right, it’s being upfront with customers.”
But, it is the fourth rule that is perhaps the most concerning of them all. The rule reads, “No Misappropriation: If a surcharge description is provided to consumers, then revenue generated from that surcharge must be used as described. For example, if it is communicated to consumers that a surcharge funds employee health coverage or wages, those funds should not be used for another purpose.”
As the Washington Policy Center points out, the regulation “seems to dictate that the entirety of the surcharge must be used for the purpose for which it is specified; meaning if a business is charging a minimum wage surcharge, all of that surcharge revenue must be passed to the employees.” That means if the “surcharge brings in more revenue than needed to cover the increased wages, then that extra revenue must go to employees.” Here’s what Ferguson had to say about it:
“Businesses are legally permitted to impose surcharges related to minimum wage increases. But if they choose to do so, my office will ensure that workers get the benefit as advertised…”
David Rolf, the president of the local SEIU 775, also had his say:
“The Attorney General’s guidelines are an important reminder that surcharges described as helping cover employee wages or benefits should be going to that purpose…
“The Attorney General’s guidelines provide clear principles for business conduct and will help make sure workers are aware of potentially unfair practices.”
In other words, if an employer “fails to pass along every penny of the surcharge to workers (or can’t prove that every penny has been passed along) it seems they could be in the crosshairs of the AG and organized labor.” The Washington Policy Center,
“As a union executive, Rolf’s concern for workers over ‘unfair practices’ is hypocritical since his union pushed for an exemption from the $15 minimum wage law in SeaTac. Rolf’s own union members in this city don’t benefit from the very mandate he wants to impose on others.
“The Attorney General’s rule creates a record-keeping nightmare for employers, who would be forced to make ongoing calculations to determine whether their surcharge is generating any revenue beyond the cost of the increased wages and if so, ensure every extra penny is distributed to employees.”
Beyond the regulatory burden the rules add on businesses, Ferguson’s dictations miss the point of the added surcharge. The Washington Policy Center,
“But a surcharge to offset the costs of paying all workers a higher minimum wage is not the same as a service charge that is added for specific services performed by an individual employee or employees. According to the RCW, a ‘service charge’ is defined as ‘a separately designated amount collected by employers from customers that is for services provided by employees…’ The law further clarifies that ‘service charges are in addition to hourly wages paid or payable to the employee or employees serving the customer.’
“A minimum wage surcharge is not for the specific services provided to a customer by an employee or employees, nor is it in addition to the hourly wages paid to workers. It simply helps offset the extra cost imposed by the government’s own $15 wage law.”
Ferguson’s regulations would make it difficult for employers to use a surcharge. It is a clear political effort to “restrict speech and suppress criticism of the $15 wage law.” And, it is an effort to “prevent people from understanding how the mandate increases consumer prices, creating a burden that falls hardest on the poor and on working families.” As the Washington Policy Center puts it,
“It is one thing to back a $15 wage law that sets a price control on labor, but it is something else entirely to use regulatory power to prevent people from knowing the true effects of the mandate once it is in place. The $15 wage law makes it illegal for consenting adults to agree to work for $14.99 or any lower wage. Now it looks like the Attorney General is trying to make it harder for people to learn about how that ban affects workers, business owners and consumers.”