Template revised April 12, 2018.
COMMISSION
AGENDA MEMORANDUM
Item No.
6d
ACTION ITEM
Date of Meeting
April 16, 2019
DATE: April 8, 2019
TO: Stephen P. Metruck, Executive Director
FROM: Daniel Zenk, Senior Manager Airport Operations
SUBJECT: Centralized International Support Service Contract Settlement Ratification
Amount of settlement:
$399,560.45
ACTION REQUESTED
Request Commission authorization for the Executive Director to ratify a payment of
$399,560.45 made to VIP Hospitality in 2017 for the settlement of back wages relating to the
City of SeaTac minimum wage ordinance known as Proposition 1 (SeaTac Municipal Code
Chapter 7.45).
EXECUTIVE SUMMARY
Following a December 2015 ruling by the Washington State Supreme Court regarding the City
of SeaTac minimum wage ordinance known as Proposition 1, VIP Hospitality requested
reimbursement payments under its contract for passenger services. The cost for VIP Hospitality
to pay back wages from February 2014 through November 2015 was determined to be
$399,560.45. In October 2017, Port legal counsel recommended approving settlement of the
claim with VIP Hospitality for $399,560.45 to cover its back-wage claims. Inadvertently,
payment was made to VIP in 2017 without seeking Commission approval, which was recently
discovered.
JUSTIFICATION AND DETAILS
The Port awarded VIP Hospitality (VIP) a contract for passenger services beginning February 1,
2014. The City of SeaTac passed a minimum wage ordinance known as Proposition 1 that went
into effect on January 1, 2014. Proposition 1 mandated a relatively significant increase to the
minimum wage. Proposition 1 was challenged in court, with the trial court ruling that it was not
effective within the airport. The decision was appealed to the Washington State Supreme
Court, which reversed the district court in August 2015 by ruling that Proposition 1 did apply at
the airport, and issued a mandate finalizing its decision in December 2015.
After the December 2015 mandate, the Port amended VIP’s contract to allow for an increase to
contract hourly labor rates consistent with the increase in the minimum wage effective
December 2015. In 2016, VIP requested reimbursement payments back to the beginning of the
COMMISSION AGENDA – Action Item No. 6d Page 2 of 3
Meeting Date: April 16, 2019
Template revised September 22, 2016; format updates October 19, 2016.
contract in February 2014. As Proposition 1 was effective January 1, 2014, VIP argued that a
retroactive increase was necessary to satisfy the contract, which required compliance with all
local laws and ordinances.
VIP Hospitality employees had threatened litigation for back wages, which could have included
the Port as a party and alleged the Port owed VIP the difference between the amount VIP
originally paid its workers and the amount Proposition 1 required.
The cost for VIP Hospitality to pay back wages from February 2014 through November 2015
was determined to be $399,560.45. In October 2017, Port legal counsel recommended
approving settlement of the claim with VIP Hospitality for $399,560.45 to cover its back-wage
claims based on the likelihood that the Port would be drawn into litigation over the claim, as
well as the Port’s communicated policy and expectation that all contractors comply with
Proposition 1, including coverage of any back-wage claims.
Subsequent review revealed that the payment was made to VIP in 2017 without seeking
Commission approval. The $399,560.45 payment to VIP is consistent with the Port’s
communicated policy and expectations relating to compliance with Proposition 1. Payment has
already been made to the contractor and Port staff has verified that the payment was
distributed to VIP employees. Commission ratification is required because the total amount of
the settlement payment is greater than $300,000.
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – Do not ratify the settlement payment to VIP Hospitality
Cost Implications: $0
Pros:
(1) None
Cons:
(1) Settlement payment remains out of compliance with Commission General Delegation
of Authority (as Amended June 13, 2017).
(2) Settlement payment has already been made but remains unratified.
This is not the recommended alternative.
Alternative 2 – Ratify the settlement payment to VIP Hospitality
Cost Implications: $0
Pros:
(1) Previous payment made in 2017 for back wages in compliance with Proposition 1 is
formally ratified.
(2) Compliance with Commission General Delegation of Authority (as Amended June 13,
2017) is rectified.
COMMISSION AGENDA – Action Item No. 6d Page 3 of 3
Meeting Date: April 16, 2019
Template revised September 22, 2016; format updates October 19, 2016.
Cons:
(1) None
This is the recommended alternative.
FINANCIAL IMPLICATIONS
No funds are requested by this action, as the payment of $399,560.45 was made in 2017.
ATTACHMENTS TO THIS REQUEST
None
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
November 13, 2018 – The Commission authorized execution of a contract amendment with VIP
Hospitality for support services in the International Arrivals Facility at Seattle-Tacoma
International Airport for an estimated amount of $3,220,000, effective through December
31, 2019.
September 30, 2014 – The Commission authorized execution of a contract for Centralized
International Support Services in the Federal Inspection Services (FIS) Facility at Seattle-
Tacoma International Airport for up to five years (2015-2019) for an estimated amount of
$8,700,000.
