Newsletter — September 25, 2025 | | |
POLICY
ECONOMY
ON THE LOCAL FRONT
POLITICAL NEWS
RETAIL THEFT & PUBLIC SAFETY
IN THE NEWS
TRENDS
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New IRS guidance creates significant tax liability on paid leave premiums & benefits
In February 2025, the IRS released long-awaited guidance on the federal tax treatment of state Paid Family and Medical Leave (PFML) programs. The ruling carries major implications for Washington, Oregon, and Colorado, where employer premium contributions are required. For the first time, both employees and employers face federal tax liability in ways not previously contemplated.
Currently, employers contribute 55% of medical leave premiums while employees pay 45%. Family leave premiums are funded entirely by employees. The new IRS guidance imposes straightforward tax liability on family leave benefits even with employer premium contribution. The treatment of medical leave benefits, however, is more complex, creating challenges for claimants, employers, and the PFML program.
To minimize tax exposure and burdens on all parties, the PFML program is reviewing a proposal to shift employer contributions from medical leave to family leave. Under this approach, employers would cover 59% of family leave premiums, while employees would assume 100% of medical leave premiums.
WR’s Government Affairs team is actively engaged in efforts to address the proposed shift in premium collection for the Paid Family and Medical Leave (PFML) program. The association is working to ensure that any changes do not increase the burden on employers compared to the current premium structure. A key concern is the issue of retrospective tax liability, given the IRS effective date of January 1, 2026. Even if the Legislature prioritizes and passes the proposal during the 2026 session, uncertainty remains about whether the PFML program’s systems will be ready in time. As part of this work, WR team member Rose Gundersen is representing the business community on the PFML Advisory Committee, advocating for practical solutions and employer protections.
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LCB hosts feedback sessions on alcohol product placement rulemaking
The Washington State Liquor and Cannabis Board (LCB) is seeking public input on its draft rules regarding retail alcohol product placement. Two online feedback sessions have been scheduled to share updated rule language and outline next steps.
Both sessions will present the same information and are open to all interested participants. Those unable to attend can submit written comments by emailing rules@lcb.wa.gov. Recordings of the sessions will also be made available for later viewing.
Session Details:
Wednesday, September 24, 1:00 to 2:30 p.m.
Join on your computer, mobile app, or room device
Meeting ID: 211 926 114 176 6 | Passcode: DE9xr7Xy
Audio only: 833 322-1218, 407118635# | Phone Conference ID: 407 118 635#
Friday, September 26, 10:00 to 11:30 a.m.
Join on your computer, mobile app, or room device
Meeting ID: 238 056 609 835 5 | Passcode: Dj6996vR
Audio only: 833 322-1218, 934607193# | Phone Conference ID: 934 607 193#
Participants can ask questions using the raise hand feature. Written questions submitted in the chat will be added to the rulemaking record and addressed as time allows.
Additional details and access information are available on the LCB Rules webpage.
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Washington updates single-use bag rules for 2026
The Washington State Legislature recently passed HB 1293, updating the state’s single-use bag regulations effective January 1, 2026.
Plastic film bags will continue to be 2.25 mil thick until 2028, delaying the previously scheduled increase to 4 mil. Starting in 2026, retailers and restaurants must collect a 12-cent charge for plastic bags, while the fee for paper bags remains 8 cents. An additional 4-cent fee will apply to plastic bags 4 mil or thicker from January 1, 2026, through December 31, 2027, supporting the state’s waste reduction and recycling efforts.
Plastic bags must be reusable, contain at least 40% post-consumer recycled material, and meet a minimum usage of 125 times. Paper bags must be compostable and meet minimum recycled content requirements. Customers using food benefits are exempt from fees.
Businesses are encouraged to reduce disposable bag use by promoting reusable bags and displaying “Bring Your Own Bag” or “Go Bag Free” messaging. Updated flyers and resources are available for staff and customer communication.
For more information or a list of carryout bag distributors, visit Ecology.wa.gov/BagBan or contact Carolyn Bowie at Carolyn.Bowie@ecy.wa.gov.
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Proposed mass layoff notice rules open for comment
The Washington State Employment Security Department (ESD) has released draft rule language to implement Engrossed Substitute SB (ESSB) 5525, passed during the 2025 legislative session. The legislation is designed to support workers facing unemployment caused by business closures or mass layoffs.
Under ESSB 5525, employers with 50 or more full-time employees must provide 60 days’ written notice before initiating a business closure or mass layoff. Notification must be sent to both ESD and the affected employees, or their bargaining representatives if applicable.
Employers who do not comply with these notice requirements may face civil penalties.
The draft rules clarify how employee information submitted to ESD will be used. According to the department, this information will be applied strictly for purposes of administering and providing services under the Employment Security Act.
Both employer and employee communities are concerned that ESSB 5525 did not include a provision to exempt employee information shared with ESD from the Public Disclosure Act. This will require the Legislature to act in the next session.
Stakeholders are invited to review the draft rules and provide comments by October 10, 2025. Details are available on ESD’s rulemaking homepage.
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Workers’ compensation proposed 2026 rates: Sustainability concerns ahead
Labor & Industries (L&I) has proposed an average 4.9% workers’ compensation rate increase for 2026 across 293 of the state’s 327 risk classes. While this avoids the double-digit hike implied by the actuarial break-even rate of 13.3%, the difference will once again be covered by the contingency reserve.
While this provides short-term relief for employers—who will shoulder about 75% of the increase—it raises long-term sustainability concerns. National research comparing all 51 U.S. workers’ compensation systems highlights two ways Washington’s system is distinct:
- No independent financial rating – Unlike private insurers in other states, Washington’s state fund is not evaluated by AM Best or any comparable rating entity. That leaves employers and policymakers without an external benchmark on solvency.
- High national cost ranking – Washington’s benefit costs remain among the highest in the nation because over 75% are spent on time loss and pensions instead of medical. The national median on medical benefits is 53%.
The issue is not just the 2026 increase, but the state’s continued reliance on the contingency reserve since 2021. Without reforms, Washington risks facing larger and more disruptive increases in the years ahead.
Public hearings are scheduled or send written comments by 5 p.m. on Oct. 30. Final rates will be adopted Nov. 26 and take effect Jan. 1, 2026.
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Oct. 28 at 10 a.m. – L&I Headquarters, Tumwater
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Oct. 29 at 9 a.m. – CenterPlace Event Center, Spokane Valley
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Oct. 30 at 10 a.m. (virtual only) –Zoom Meeting, or by phone at 253-215-8782
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Balancing opportunity and safety for young workers in Washington
Recent legislative changes are reshaping how Washington employers can hire and train young workers. HB 1644, passed earlier this year, added new requirements for businesses that employ minors. While the goal is to ensure safety, some employers and programs have expressed concern that the added regulations may limit opportunities for youth to gain early work experience.
One notable impact is the closure of the Lemon Heads program in Spokane, which had given high school students the chance to work in construction while earning competitive wages. Longstanding agricultural operations, such as a Walla Walla strawberry grower, have also reported challenges in continuing youth employment opportunities due to increasing regulations and costs.
At the same time, progress has been made to expand career pathways for students. HB 1414 broadened the scope of the Career and Technical Education Task Force to identify rules that prevent students from receiving training or certification in their chosen fields. HB 1722 updated restrictions to allow 16- and 17-year-olds to gain experience in areas such as health care, firefighting, and emergency services.
Employers and policymakers alike continue to work toward a balance between safeguarding young workers and preserving valuable early job experiences.
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Retail sales show steady growth in August
Retail spending continued to rise in August, supported by back-to-school shopping, lower fuel costs, and tax-free holidays, according to the CNBC/NRF Retail Monitor powered by Affinity Solutions. Consumers also advanced purchases to get ahead of potential tariff-related price increases.
Total retail sales, excluding automobiles and gasoline, grew 0.5% month over month and 6.81% year over year. Core retail sales, which exclude restaurants, auto dealers, and fuel, increased 0.26% month over month and 6.67% year over year. For the first eight months of 2025, total sales were up 5.08% while core sales rose 5.27%.
The Monitor, which uses anonymized credit and debit card transaction data, showed gains in most retail categories. Digital products led the growth, up 25.98% year over year. Clothing and accessories stores increased 8.26%, sporting goods rose 8.96%, and grocery sales climbed 7.17%. General merchandise also posted a 7.63% year over year gain.
NRF President and CEO Matthew Shay noted that while some inflationary effects are appearing, employment levels remain stable, allowing consumers to prioritize household needs while adjusting discretionary spending. Overall, the August data reflects resilience in consumer activity across the retail sector.
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Layoffs reshape Seattle’s economy, threaten UI trust fund solvency
Three quarters into 2025, layoff announcements from Microsoft and Amazon are no longer headline news but a regular occurrence. Their impact now extends beyond the tech sector, straining small businesses, housing demand, and the stability of Washington’s unemployment insurance (UI) trust fund.
Seattle’s Tech Dependence: According to the Wall Street Journal, nearly 40% of the region’s tech workforce is employed by Amazon and Microsoft. By comparison, Alphabet and Meta account for only 15% of tech jobs in San Francisco. This 25-point gap explains the outsized impact in Seattle, where restaurants, rideshare drivers, and landlords are already feeling the downturn.
UI Usage Rising: At the UI Advisory Committee’s August meeting, the Employment Security Department (ESD) reported a notable shift in program usage. Before COVID, the recipiency rate was 27%. By 2023—well after pandemic layoffs had ended—the recipiency rate had climbed to 37%, with more claimants exhausting benefits than in prior years. The rise extends beyond tech: construction, manufacturing, and wholesale industries are also showing increases, likely tied to housing market stagnation, AI disruption, and cuts in management roles.
Cost Implications Ahead: Since 2023, Washington’s UI recipiency rate has exceeded the national average, and the gap widened by nearly 40% between 2024 and 2025. If the trend continues, ESD forecasts that a solvency tax could be triggered as soon as mid-2026, imposing new costs on all employers.
For business owners and policymakers, the message is clear: Seattle’s tech-driven layoffs are reshaping the local economy and placing new pressure on the state’s UI system.
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Swipe fees add $300 million to Halloween spending
Families shopping for costumes, candy, and decorations this Halloween will see a hidden cost in the form of credit card “swipe” fees. The Merchants Payments Coalition estimates that these processing fees will total more than $300 million this season.
Swipe fees are charges that banks and card networks apply to merchants for handling credit card transactions. On average, they represent 2.35 percent of each sale and can be among retailers’ highest operating costs after labor. Since most consumers pay with cards, the fees are typically factored into prices, affecting all shoppers regardless of how they pay.
According to the National Retail Federation, families are expected to spend an average of $114.45 on Halloween items this year, contributing to $13.1 billion in overall sales. The coalition calculates that swipe fees account for about $2.70 of that per household, which equals the cost of 18 pieces of candy from a standard bag.
As spending continues to rise, swipe fees are drawing attention in policy discussions. The proposed Credit Card Competition Act seeks to increase options for processing networks, which supporters say could enhance competition and potentially reduce costs for merchants and customers alike.
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Consumers start holiday shopping early, focus on value
As the 2025 holiday season approaches, U.S. consumers are beginning their shopping earlier than in past years, driven largely by concerns about inflation and overall affordability. A recent ConsumerWise survey of over 4,000 shoppers shows that two-thirds plan to start holiday purchases before Black Friday. While total spending is expected to remain similar to previous years, shoppers are prioritizing essentials and practical gifts, with gift cards and groceries among the top planned purchases.
Retailers are seeing shifts in consumer behavior, including trading down to lower-priced items, selecting smaller pack sizes, or choosing discount channels. Millennials, in particular, are leading the early shopping trend, while lower-income households show some pullback in spending.
For retailers and consumer packaged goods companies, these trends highlight the importance of offering clear value, well-timed promotions, and personalized experiences. Early merchandising, targeted promotions, and operational readiness are key, as shoppers are researching and purchasing months ahead. While Black Friday remains significant, the season’s sales momentum is spreading across the months leading up to it, making strategic planning essential to meet evolving consumer preferences.
| | Crystal Leatherman, WR's Director of Policy & Government Affairs, testifies at the Bellevue City Council meeting. | | |
Bellevue adopts ordinance targeting repeat offenders
The Bellevue City Council just passed an ordinance, introduced by Councilmember Jared Nieuwenhuis, that addresses public disorder crimes in the city. The measure passed on a 6–1 vote.
The ordinance focuses on repeat offenders, establishing mandatory minimum sentences of 30 days for chronic violations such as shoplifting and vehicle prowling. It also provides pathways to rehabilitation through diversion and community court programs, striking a balance between accountability and support.
WR testified in person and submitted a letter of support to the council underscoring the urgent need to deter organized retail crime and protect the safety of employees, customers, and the broader community.
With this step, Bellevue demonstrates its commitment to safeguarding both community wellbeing and the city’s reputation as a premier destination for the region.
| | Mayor Bruce Harrell announces a proposed sales tax increase that would fund public safety priorities at a news conference at Fire Station 10 in Seattle on Thursday. (Karen Ducey / The Seattle Times) | | |
Seattle Mayor proposes sales tax increase for public safety initiatives
Seattle Mayor Bruce Harrell has introduced a proposal to increase the city’s sales tax by 0.1 percent to support public safety programs. The authority to raise local sales taxes for this purpose was granted by the state earlier this year.
If approved by the City Council, the measure is expected to generate nearly $40 million annually. Funds would be used to expand nonpolice emergency response through the city’s CARE department, add 911 dispatchers, support the Law Enforcement Assisted Diversion program, expand treatment and recovery beds, and recruit new firefighters.
The CARE department, which currently has 24 responders, would double in size under the plan. CARE teams handle calls such as welfare checks and overdose incidents that may not require police response. According to city officials, these teams have successfully responded to thousands of calls without incident.
Council President Sara Nelson has voiced interest in ensuring a portion of funding goes specifically toward treatment programs, and the council will review Harrell’s proposal in the upcoming budget process.
The proposal comes as Seattle works to balance its 2026 budget while addressing projected deficits and voter decisions on additional tax measures this fall.
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Federal designation labels Antifa a terrorist organization, sparking local response
President Donald Trump’s September 17, 2025, announcement that Antifa will be designated as a “major terrorist organization” has prompted discussion across Washington state.
Seattle Police Officers Guild President Mike Solan expressed support, saying it could provide additional federal resources to address public safety concerns related to past protests. Solan highlighted challenges Seattle officers faced during demonstrations in recent years, including injuries and long-term stress.
Others have raised questions about the move. Some legal experts point out that Antifa is a decentralized movement rather than a formal organization, which may complicate enforcement. Washington State Rep. Jim Walsh (R-19) emphasized the need to investigate funding sources, while Washington State Democratic Party Chair Shasti Conrad criticized the designation, arguing that Antifa represents anti-fascist views rather than an organized entity.
The designation has renewed debate about how best to balance public safety, free expression, and the role of federal authority in addressing politically motivated violence.
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Seattle reviews public safety legislation one year in
Seattle City Attorney Ann Davison recently reported on the impact of public safety legislation adopted since early 2024. The Seattle City Council has passed 24 measures addressing issues such as open drug use, prostitution, and illegal street racing.
Among them is the Stay Out of Drug Areas law, which allows courts to restrict individuals convicted of drug-related crimes from entering designated neighborhoods. Since its passage in August 2024, 115 orders have been issued, with the most concentrated in Capitol Hill, the Chinatown-International District, and downtown.
To address prostitution concerns, the council also enacted a loitering law focused on buyers of commercial sex. This has resulted in 32 orders to date, primarily against those seeking to purchase sex.
Illegal street racing, another major concern, has been met with civil infractions ranging from $500 to $1,500 depending on repeat offenses. Nineteen infractions have been issued since July 2024, with most cases resolved at the first offense level.
City leaders say early results show progress, while ongoing discussions, including the upcoming 2026 budget process, will guide next steps in strengthening public safety efforts.
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Seattle expands use of “stay out” zones
Seattle prosecutors are increasing the use of “stay out” zones that restrict individuals from entering specific parts of the city following certain arrests. The zones, established by City Council in late 2024, were created to address public safety concerns in areas with higher levels of drug activity and prostitution.
Since the start of 2025, prosecutors have secured more than 100 orders related to drug arrests, covering portions of downtown, Capitol Hill, the Chinatown International District, Belltown and Pioneer Square. Judges have also issued more than 30 orders connected to prostitution-related arrests along Aurora Avenue.
City Attorney Ann Davison explained that the gradual rollout was due in part to law enforcement adapting to new public safety laws. The orders are a condition of pretrial release and allow police to rearrest individuals if they are found in restricted areas.
Seattle leaders have emphasized that the zones are one of several tools being used to support downtown recovery and improve public safety. Officials continue to evaluate their role in addressing crime patterns, while acknowledging that the policy has sparked debate over its long-term effectiveness.
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AWB policy summit
The Association of Washington Business (AWB) recently hosted its annual Policy Summit in Spokane, bringing together employers, policymakers, and industry leaders from across the state. Crystal Leatherman attended the conference representing WR.
Highlights included bipartisan discussions on trade and tariffs, a joint appearance by the presidents of UW and WSU on workforce and research priorities, and legislative previews of Washington’s budget and policy outlook. National voices also weighed in on democracy, polarization, and global dynamics.
The Summit provided valuable insight into the challenges and opportunities facing Washington employers, reinforcing the importance of collaboration between business and government in shaping the state’s economic future.
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Seattle faces a shift in tech employment
For decades, the Seattle region thrived on the rapid growth of Amazon and Microsoft, transforming into one of the nation’s leading tech hubs. That boom brought rising home values, new startups, and bustling retail and restaurant sectors. Now, the local economy is adjusting to a slowdown.
Since 2023, Amazon and Microsoft have together cut more than 46,000 jobs, representing the majority of local tech layoffs. While Microsoft’s market value has grown, its U.S. workforce has expanded only slightly, and Amazon recorded its first employment decline in Washington state in 2024. Other Seattle-area companies, including Expedia and Redfin, have also scaled back.
The ripple effects are evident. Restaurant and retail sales near corporate campuses have dipped, with hundreds of restaurants closing in 2025. Commercial real estate vacancies are at record highs, and housing activity has slowed. The city faces a projected $146 million budget shortfall from weaker payroll and sales tax revenues.
Despite these challenges, downtown activity has picked up as companies require more in-person work, and sectors like aerospace and trade remain steady. Still, many workers are shifting to other industries or entrepreneurship as the tech job market recalibrates for a future shaped by automation and artificial intelligence.
Read the full WSJ article here.
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WR diversity statement
WR is committed to the principles of justice, equity, diversity, and inclusion. We strive to create a safe, welcoming environment in which these principles can thrive.
We value all people regardless of race, ethnicity, gender, religion, age, identity, sexual orientation, nationality, or disability, and that is the foundation of our commitment to those we serve.
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Renée Sunde, President/CEO — 360.200.6450 — Email
Crystal Leatherman, Dir of Policy & Government Affairs — 360.200-6453 — Email
Rose Gundersen, VP of Operations & Retail Services — 360.200.6452 — Email
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