Washington Changes To Overtime Exemptions Go Into Effect July 1, 2020

By Jessica D. Osborne - Bullard Law

July 1, 2020

Changes to Washington State Department of Labor and Industry (L&I) rules relating to overtime exemptions took effect on July 1, 2020. The changes were announced in December and relate to when “white collar” employees receive the protections of the Washington Minimum Wage Act (“MWA”), including earning at least minimum wage and overtime benefits. The updates specifically relate to executive, administrative, and professional employees. The updates also relate to outside salespeople and computer professionals.

Generally speaking, for white collar employees to be exempt under MWA, they must be paid a fixed salary, perform certain job duties, and the salary must be greater than a minimum salary threshold. The rule changes make changes to both the job duties tests and minimum salary threshold.

First, the rule changes update the “job duties test,” to bring Washington’s test in-line with the current federal job duties test. Prior to implementation of these changes, Washington had continued a version of the former federal Fair Labor Standards Act (FLSA) duties tests, using both long and short form tests. Effective today, Washington’s test now implements a single test standard. The job duties tests require an employer to determine if the potentially exempt employee’s job duties, rather than a title or job description, meet the requirements to be exempt from the MWA. The goal of these changes is to bring consistency and reliability to employers to comply with the rules in various jurisdictions.

Second, the rule changes update the minimum salary basis amount a salaried employee must receive to qualify as exempt under MWA. The salary amount will increase incrementally and annually, and for Washington’s largest employers, will reach 2.5 times the state’s minimum wage by 2028.  Between now and 2028, the annual rates of increase will be more gradual for employers with fewer than 50 employees than for employers with greater than 50 employees. L&I provides guidance for employers on the changes to the annual minimum salary increases over time based on the number of employees at https://lni.wa.gov/forms-publications/F700-207-000.pdf.

For now (from July 1, 2020 to January 1, 2021, for employers of all sizes, the effective guaranteed salary amount under the Washington MWA to meet the white-collar worker exemptions must equal $675 per week ($35,100 annually). In comparison, the current federal minimum salary for the white-collar exemption under FLSA is $684 per week ($35,568 annually). Since most employers are covered by both sets of laws and currently meet the FLSA salary threshold, the current Washington changes should have little, if any, effect. On January 1, 2021, that changes: the minimum salary threshold for employees working for employers with 1-51 employees will increase to $827 per week ($43,004 annually), and to $965 per week ($50,180 annually) for employees working for employers with 51 or more employees.  By 2028, the minimum Washington salary amount will top out at $1,603 per week ($83,356 annually) for all businesses.

L&I projects that tens of thousands of Washington employees may qualify for overtime by 2028 due to the increasing threshold salary amounts. The question facing employers is how to respond to these changes.

For those rare employers/employees not covered by the FLSA and who now fall below the new Washington level of $675 per week ($35,100 annual), prompt changes are required to be in line with the state minimum salary threshold. The options available include converting formerly exempt employees to non-exempt salaried employees subject to overtime; converting formerly exempt employees to non-exempt hourly employees subject to overtime; or maintaining exempt status by increasing salaries.

More importantly, for all employers this is an excellent opportunity to review the duties of current exempt employees to ensure that they are in line with the Washington and FLSA duties tests for its executive, administrative, and professional salaried employees.  As always, our team at Bullard Law is here to help if you have any questions.