The earnings thresholds and other conditions necessary to exempt employees from overtime rules will change on July 1, 2020 under the Washington Minimum Wage Act and on January 1, 2020 under the federal Fair Labor Standards Act (“FLSA”). The changes will generally affect management-level and professional employees who are considered exempt from overtime pay. The changes will also affect these employees’ rights to paid sick leave and other benefits under applicable labor laws.
WA Overtime Rules (Effective July 1, 2020)
In general, Washington workers need to meet the following conditions to be exempt from overtime pay:
1) Be paid on a salaried basis;
2) Be paid a minimum salary level; and
3) Perform specific job duties as an executive, administrative, or professional worker, outside salesperson, or computer professional as set forth in the state rules.
On July 1, 2020, the conditions on (2) the minimum salary level and (3) job duties will change as follows:
・Minimum Salary Level
The salary threshold will increase based on the state minimum wage. In Washington, the current minimum salary threshold is $455 a week ($23,660 a year) under the FLSA, which is more favorable than the state rules. Beginning July 1, 2020, the minimum salary level will be at 1.25 times the state minimum wage ($13.50 an hour); that is, $675 a week ($35,100 a year). In other words, with some exceptions noted later, after the change goes into effect, employees earning an annual salary less than $35,100 are eligible for overtime, while employees earning $35,100 or more are not. The multiplier of the minimum wage will increase to 2.5 incrementally by 2028. (But see “Federal Overtime Rules” below.)
The following is the salary threshold implementation schedule. The salaries from 2021 are projections published by the WA Department of Labor and Industries, which based its calculations on an estimated Consumer Price Index for Urban Wage Earners and Clerical Workers and thus are subject to change:
Bonuses, commissions, and benefits are not salaries and thus do not count towards the salary thresholds (no change from the current rules).
The following is the salary threshold implementation schedule. The salaries from 2021 are projections published by the WA Department of Labor and Industries, which based its calculations on an estimated Consumer Price Index for Urban Wage Earners and Clerical Workers and thus are subject to change:
| Effective Date | 7/1/2020 | 1/1/2021 | 1/1/2022 | 1/1/2023 | 1/1/2024 | 1/1/2025 | 1/1/2026 | 1/1/2027 | 1/1/2028 | |
| Employers with 1-50 Employees | Minimum Wage Multiplier | 1.25 | 1.5 | 1.75 | 1.75 | 2 | 2 | 2.25 | 2.25 | 2.5 |
| Weekly ($) | 675 | 827 | 986 | 1,008 | 1,177 | 1,202 | 1,382 | 1,412 | 1,603 | |
| Annual ($) | 35,100 | 43,004 | 51,272 | 52,416 | 61,204 | 62,504 | 71,864 | 73,424 | 83,356 | |
| Employers with 50+ Employees | Minimum Wage Multiplier | 1.25 | 1.75 | 1.75 | 2 | 2 | 2.25 | 2.25 | 2.5 | 2.5 |
| Weekly ($) | 675 | 965 | 986 | 1,152 | 1,177 | 1,353 | 1,382 | 1,569 | 1,603 | |
| Annual ($) | 35,100 | 50,180 | 51,272 | 59,904 | 61,204 | 70,356 | 71,864 | 81,588 | 83,356 |
Bonuses, commissions, and benefits are not salaries and thus do not count towards the salary thresholds (no change from the current rules).
Regarding the employee count, employers need to count both full-time and part-time employees working in Washington as of the effective date of each step of the implementation schedule. If the employer-size determination for the purposes of state Employment Security Department for Paid Family and Medical Leave states fewer than 50 employees, the employer may rely on the classification for the following calendar year in determining the classification for overtime purposes.
Exceptions: Computer Professionals, Teachers, and Outside Salespersons
Computer Professionals
The following schedule applies to computer professionals:
| Effective Date | 7/1/2020 | 1/1/2021 | 1/1/2022 |
| Employers with 1-50 Employees | $27.63 per hour | Minimum Wage x 2.75 | Minimum Wage x 3.5 |
| Employers with 50+ Employees | Minimum Wage x 2.75 | Minimum Wage x 3.5 | Minimum Wage x 3.5 |
Teachers
Teachers are not subject to the new state salary thresholds if the following conditions are met:
1) A primary duty is teaching, tutoring, instructing, or lecturing to impart knowledge;
2) An employee is employed and engaged in activities as a teacher in an educational establishment; and
3) Compensation is made on a salary or fee basis.
Outside Salespersons
The new overtime salary thresholds do not apply to outside salespersons. Their exempt or nonexempt status will be determined generally under the current overtime rules as follows:
1) Primary duties are related to sales;
2) Duties other than sales do not exceed 20% of the hours per week worked by nonexempt employees;
3) Primary duties are customarily and regularly performed away from the employer’s place of business; and
4) Compensation is made on a guaranteed salary, commission, or fee basis and the employees are advised of their status as “outside salesperson.”
・Job Duties Tests
The new rules eliminate the current long and short job duties tests (a more rigorous long-duties test for lower salary level and a less rigorous short-duties test for higher salary level). This aligns the state tests more closely with federal standards to determine if an employee qualifies for the overtime exemption.
Federal Overtime Rules (Effective January 1, 2020)
Starting January 1, 2020, the federal minimum salary threshold under the FLSA will be $684 a week ($ 35,568 a year). This amount is higher (i.e., more favorable to employees) than the state threshold in 2020; therefore, Washington employers will need to comply with the federal threshold in the first phase of the incremental thresholds.
The new federal rules allow employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the federal salary level.
Effect on Other Employees’ Rights: Paid Sick Leave and Rest Breaks/Meal Periods
・Paid Sick Leave
Employees who will become non-exempt workers under the new rules will be eligible for the Washington Paid Sick Leave. However, employees in Seattle, Tacoma, and SeaTac (hospitality and transportation industries only for SeaTac) are also protected under the local Paid Sick and Safe Leave ordinances; therefore, the changes may not affect them and their employers.
・Rest Breaks and Meal Periods
Non-exempt employees are eligible for a rest break for at least 10 minutes for every four hours worked (in some jobs, this can be “mini” rest breaks totaling 10 minutes instead of a scheduled 10-minute rest break). In addition, non-exempt employees must receive 30 minutes of mealtime for every 5 hours worked. Employee who will become non-exempt workers under the new rules will also be eligible for these breaks. More information about rest breaks and meal periods is available on the Washington Department of Labor and Industries’ webpage.
Options to Employers
Employers affected by the new rules may take one or more of the following actions:
– Not changing salaries, and converting exempt employees to nonexempt employees (employers need to provide benefits available to nonexempt employees, such as overtime pay, paid sick leave, and rest breaks)
– Limiting employees’ work hours to 40 a week (although there will be no overtime pay, non-exempt employees are still eligible for other benefits such as paid sick leave and rest breaks)
– Maintaining exempt status by meeting salary threshold requirements for exempt workers under the federal and state laws
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