ALERT: Washington changes salary and duties tests for exempt employees
Wage and Hour
On December 11, 2019, Washington’s Department of Labor and Industries (L&I) announced major changes to Washington’s minimum salary requirements for exempt workers and to the “duties test” for executive, administrative, and professional workers, which will be effective July 1, 2020. As Vigilant previously reported, when L&I first proposed these rules, Vigilant submitted comments suggesting a phased-in approach, and that is largely what L&I did in the final rules. But Washington’s new minimum salary threshold will eventually far exceed the new federal minimum salary threshold.
The new Washington rules will raise the minimum salary threshold for exempt workers to a multiplier of the state minimum wage, starting at 1.25x the state minimum wage (about $675 per week or $35,100 per year) on July 1, 2020, and phasing in to 2.5x the state minimum wage (estimated to be approximately $1,603 per week or $83,356 per year) by January 1, 2028. Depending on the size of the business, the multiplier will increase most years on January 1 from 2021 to 2028. The January 1 rate change each year will depend on whether a business has 50 or fewer workers versus 51 or more workers. Employers should thoroughly review L&I’s “New Salary Threshold Implementation Schedule,” which has a chart detailing the dates, multipliers, and projected minimum salary thresholds throughout the phase-in process from July 1, 2020, to January 1, 2028.
The state minimum salary threshold for exempt employees as of July 1, 2020 is actually lower than the new federal minimum salary threshold that will take effect on January 1, 2020. Employers meeting the new federal minimum salary threshold for exempt employees ($684 per week week, or $35,568 per year) will already be in compliance with the new state minimum ($675 per week, or $35,100 per year) that will be required starting July 1, 2020. However, based on L&I’s implementation schedule, starting January 1, 2021, the state minimum will exceed the federal minimum. The rate going forward will depend on the size of the company, until 2028, when the rate will be 2.5x the state minimum wage for all employers.
In addition to changing the salary requirements, L&I is also changing the “duties tests” to qualify as an exempt executive, administrative, or professional worker, and as an exempt computer professional or outside salesperson. The new state rules mostly align with federal Department of Labor tests under federal law for the same types of exempt workers. Notably, the new rules set a higher minimum salary threshold for computer professionals than for other types of exempt workers (see Table 1 of the new rules).
Tips: Because the federal salary threshold will initially be higher than the new state salary threshold, most of Washington’s changes won’t start impacting your budget until January 1, 2021. But there’s one major exception: Effective July 1, 2020, employers with 51 or more employees who currently pay their exempt computer professionals a minimum hourly wage of at least $27.63 (as authorized by federal law) will have to pay them a minimum hourly wage of 2.75 times the Washington minimum wage. At that time, the state minimum wage will be $13.50 per hour, resulting in a minimum threshold of $37.13 per hour to qualify for the computer professional exemption. Employers should read L&I’s “Key Facts of the Washington Overtime Rules Changes,” the implementation schedule for the new salary requirements (other than for computer professionals), and the new rules themselves to get a better understanding of the duties tests for executive, administrative, professional, and computer employees and outside salespeople. Please also review Vigilant’s Legal Guides, When Is an Employee Exempt Under Federal Law and State Laws on the White Collar Exemptions from Overtime. As always, contact your Vigilant employment attorney with questions or concerns.