Seattle Sun Newspaper - Vol. 8, Issue 1, January 2004
Copyright 2003 Seattle Sun. Please feel free to use the article below in your research. Be sure to cite the Seattle Sun as your source.
Workers comp rates, taxes to rise in 2004
By CLAYTON PARK
The cost of employing workers in Washington state is going to be a little bit higher in 2004 than it was this past year.
The state Department of Labor and Industries recently announced that workers' compensation premiums taxes collected to cover the cost of on-the-job injuries will rise, on average, 9.8 percent in 2004, effective Jan. 1.
While that's seen as bad news for employers, who must shoulder the bulk of that increase, it could have been worse.
L&I in September proposed a 19.4 percent average increase, but agreed to lower the rate hike after hearing testimony from business owners who said the larger increase would be a hardship, given other rising costs and the poor economy, said Paul Trause, the department's director.
"I will have to sell more than 200 gallons of paint" just to make up for the increase in workers' comp premiums in 2004, said Robin Daly, co-owner of Daly's Paint & Decorating Centers. "That's a lot of paint."
Daly, a third-generation business owner whose company has a store and small factory in the Fremont neighborhood as well as a store in Bellevue, said the increase in workers' comp premiums "isn't the only area I'm seeing increases in costs. We're also faced with a 20 percent increase in our health care premiums."
Nevertheless, Daly calls her 40 employees "my most important asset. I don't want to begrudge anybody what they deserve, but it's getting very difficult to run and business and do right by everybody."
Next year's increase in workers' comp premiums comes on top of a 29 percent average increase that took place in 2003.
Workers' comp premiums, on average, in 2003 cost slightly more than 52 cents an hour per employee. Twenty-three percent is deducted from workers' paychecks, with the balance covered by employers. Washington is the only state in the nation that requires workers to share in the cost of workers' comp premiums.
The 2004 increase will vary, depending on what industry "risk class" a particular business is in, and the individual employer's claims history.
For example, premiums for cold-storage warehouse workers will rise 25 percent, while rates for parking lot attendants will increase 22 percent. Premiums for department store employees will climb 20 percent. Premiums for hardware stores the category that Daly's business falls under will rise 11 percent.
L&I also announced that Gov. Gary Locke will appoint a panel of business and labor leaders to examine the state's workers' comp system, including rate-setting policies and how the agency manages claims.
Business leaders called L&I's decision to lower the average increase for workers' comp premiums next year a partial victory.
"It's an encouraging step forward, but we still have a lot of work to do" to reform the system, said Don Brunell, president of the Association of Washington Business.
Carolyn Logue, state director for the National Federation of Independent Businesses, said "Knocking it down to 9.8 percent is testimony to the power of small businesses and their ability to convey the impact of rate increases," but added, "it's not a total victory." Even a small increase will be a struggle for some businesses to absorb, she said.
The Washington Restaurant Association issued a press release objecting to the tax increase. Restaurant owners are also among the businesses that will be affected by the 15-cent per hour increase in the state's minimum wage that also takes effect, Jan. 1. The new $7.16 per hour minimum in 2004 will make Washington the state with the highest minimum wage in the nation, well above the federal minimum wage of $5.15 an hour.
Business groups such as the AWB, NFIB and restaurant association, have long contended that Washington, which also has one of the highest unemployment insurance rates in the country, is among the most "unfriendly" places in the nation to operate a business.
Employers in the Evergreen state currently pay the second-highest unemployment insurance taxes in the country more than three times the national average. Unemployment insurance taxes will rise 14 percent, beginning in January.
Washington also requires companies to pay a business-and-occupation tax, which most other states do not have. The B&O tax is assessed by the state on a business's gross receipts how much it takes in regardless of whether it resulted in a profit. What's more, several cities in this state also assess an additional B&O tax of their own.
But the Washington State Labor Council disputes pro-business groups' characterization of Washington as being unfriendly to businesses. The Labor Council points out that businesses in Washington enjoy advantages by being here as well, including quality of life, a wealth of capital, a highly educated work force, good high-tech infrastructure and a high level of exports.
The Labor Council praised the state's decision to keep the increase in workers' comp rates to single digits, calling it not only good news for businesses struggling in a weak national economy, but because it will directly benefit Washington workers who pay a significant portion of L&I costs.
The council warned, however, that the L&I's contingency reserve fund must remain strong enough to withstand continued economic weakness and potential stock market declines in the future. The group also pointed out that even with the announced increase, the cost of Washington's public workers' compensation system still ranks below at least 30 other states, according to L&I estimates. "We don't want to end up like California, where workers' comp costs come out of the general fund, and premium increases have skyrocketed," said Labor Council Secretary-Treasurer Alan O. Link.
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For more information, visit the Department of Labor and Industries Web site, www.LNI.wa.gov.