The first major changes to the state’s overtime rules since 1976 are set to take effect in 2020. The new rules use a formula based on the state minimum wage to determine the minimum salary a worker must receive to be exempt from overtime. The changes will be phased in starting July 1, 2020 and will be fully implemented by January 2028. The Department of Labor & Industries (L&I) has updated the employment rules that determine which workers in Washington are required by law to be paid at least minimum wage, earn overtime pay, and receive paid sick leave and other protections under the state Minimum Wage Act.
These rule changes specifically focus on employees generally working in a management or professional capacity that are paid a set salary. A combination of a predetermined fixed salary, the salary meeting a minimum threshold, and specific job duties determines whether a worker meets the definition of an executive, administrative, or professional worker, outside salesperson or computer professional contained in state rules. To be overtime exempt, these workers must be paid a minimum specified salary level and must primarily perform the functions of the duties of the categories listed above as defined by state regulations. Under current federal guidelines, that threshold is $455 a week. The current state threshold is $250 a week. When state and federal thresholds conflict, businesses must meet the threshold most favorable to employees.
In addition to the new state overtime rules, Washington’s minimum wage is rising on Jan. 1, 2020. It will go from $12 an hour to $13.50 an hour. The U.S. Department of Labor in September updated the federal overtime rules regarding executive, administrative, and professional workers. Effective Jan. 1, 2020, the federal minimum salary threshold will be $684 a week. Salaried exempt employees will have to be paid at least that amount in 2020 because it is higher than the first phase on the incremental state threshold increase of 1.25 times the state minimum wage ($675 a week).
Employers have multiple options to comply with the rules. A few options could be to convert current exempt salaried employees to non-exempt and pay them overtime if they work more than 40 hours per week, limit the allowable work hours to 40 hours per week for all employees, or increase salaries to keep exempt employees as exempt under the new state laws. If they wish to maintain the employee’s exempt status, they would need to ensure the employee meets the duties test requirements and is paid at least the updated salary threshold requirements each year.
For a quick reference to the amounts for the new salary threshold, please see the implementation schedule on the Washington State Labor and Industries website. If you have any questions on how this change may impact your business, please reach out to our office.