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Washington Wage Lien Bill Sees Action in the Legislature

By Holly Chisa, HPC Advocacy, UTA Washington State Lobbyist

Holly Chisa

During the Washington State legislative session, it’s become clear that the Legislature is financially well off.  With over $1 billion in new revenue projected, balancing the budget is no longer a challenge.

What happens when the state is flush with cash and there are few pressing issues?  Lawmakers start to move bills that have been hanging around for years with no activity.  This year, it was the wage lien bill.

The wage lien bill has been around for several years.  Out-of-work employees who were not paid their final wages, or who were owed other payments from their employer and not reimbursed, have fought for years through justice groups to have the ability to lien the personal property of those employers.  HB 1514 and SB 6053 would allow individual employees to file a wage lien against a business owner’s personal property, including their home.  As originally drafted, the bill would have put these liens in priority position, above municipal liens and certainly above the mortgage holder.

UTA provided testimony against the bill, specifically because of the priority position of the wage lien.  Additionally, financial institutions fought against the legislation.  They were concerned that allowing for the liens could put lending at risk for businesses that have a high failure rate, like restaurants and small retail operations.  UTA offered input to the drafters of the bill, asking the advocates to consider the loose nature of the lien process established in the bill.  The liens could be filed annually, and without much oversight of the courts.

UTA also shared the impact adding additional third-party lien holders could have in the already convoluted process of dispersing the funds post foreclosure sale.  Members of the UTA are already drafting reform legislation to address the disbursement of funds issue, including identifying when a mortgage holder must determine whether it will file for funds, and how to structure the third party system to provide more structure – and less time and expense in the courts – for these funds.  Adding a new layer of folks able to engage in the third party lien process, or having these liens in the priority position, creates a significant problem within the foreclosure process.

SB 6053 did move a significant way through the legislative process.  It passed the Senate committee, even with opposition by financial institutions, and was heard in Senate Ways and Means.  The bill was amended to move these liens to the third priority position, which helped significantly.  However, it did not address the problems with the third party process.  UTA members attempted to work with the attorneys that were promoting the bill on behalf of workers to try and provide clarity on the Association’s opposition.  They also provided specific feedback on the bill, and why the Association as a whole opposed the bill.  Those suggestions for changes were dismissed as assumptions, unfortunately, and not accepted by the advocates.

Fortunately, the Bar Association UCC committee picked up the issue, and raised concerns with the bill on several levels.  The advocates agreed to step back from the issue for the session, but will be VERY likely to return with another bill in January, 2021, to push the issue.  I have also offered to have the advocate attorneys meet with UTA members during the interim.  I’ve walked them through our proposed changes to the lien process for disbursement of funds, including the third party lien process.  Part of the challenge in working with the advocate attorneys is a lack of general knowledge around the foreclosure process – only because foreclosure is not an issue area they work within on a daily basis.

It is my hope we can work with the advocates to help them draft a better bill.  I also hope to have their language mesh well with the proposed changes to the disbursement of funds, and the larger restructuring of the process.  Without a coordination of efforts and a clear path for liens, there is a high likelihood that we will be conflict with whatever they propose for policy.  Working with them becomes even more critical as we approach 2021.  There is a high likelihood that Democrats will claim a larger majority in the House and Senate.  With significant majorities, it is of interest to UTA members to work with the advocates to draft legislation that will not impact the foreclosure process, prevent effective lending, and add to the already complicated process of dispersing of funds after the sale.

More to come during the 2020 interim on this work.

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