Here we go again. Two years after the attempted modification of the federal “white collar” exempt overtime rules stalled in the federal courts, the Washington Department of Labor and Industries (L&I) is taking it upon itself to propose updated rules regarding minimum wage requirements for salaried employees at the state level. Under the proposed changes, some employers may have to provide overtime pay, minimum wages and paid sick leave to employees previously classified as “exempt” under the rules defining Executive, Administrative, and Professional (“EAP”) exemptions.
L&I began circulating the proposed changes to the EAP exemption rules in October and conducted “listening” sessions on Nov. 27, 28 and 29. L&I will consider input gathered from the listening sessions and then prepare draft rules that will be subject to a public comment period and public hearings before the rules are finalized.
The Washington Minimum Wage Act requires employers to pay overtime at a rate of time and a half for hours worked over 40 in a work week to employees unless the employees are specifically exempt from the law. Generally, to meet the definition of an exempt employee, an employee must be paid a fixed salary, that salary must meet a minimum specified amount, and the employee’s job duties must primarily involve executive, administrative, professional or outside sales duties as defined by regulations. Exempt employees are not only exempt from overtime but are also not subject to the new paid sick leave requirements passed by Initiative 1433 in 2016.
Currently the minimum salary-level requirements under Washington State rules vary from $155 per week ($8,060 annually) to $250 per week ($13,000 annually). Federal regulations set the minimum salary-level requirement at $455 per week ($23,660 annually). Washington State has not updated the salary-level requirement or the job duties regulations since 1976. In late 2016, the U.S. Department of Labor attempted to increase the federal minimum salary level to $913 per week. However, a nationwide injunction prevented the updated rules from taking effect.
L&I’s proposed changes to the EAP exemptions would tie the minimum salary-level test to a to-be-determined multiplier (proposed between 1.5 to 3) of the state minimum wage. In 2019, the minimum wage will be $12 per hour, resulting in a proposed increase in the minimum salary-level for the exemption to a range between $720 per week ($37,440 annually) and $1,330 per week ($69,160 annually). In 2020, the minimum wage increases to $13.50 per hour resulting in a potential minimum salary-level increase to $42,120 to $82,240 annually for the exemption. Employees who do not earn the increased minimum salary-level will be entitled to overtime pay at time and a half for hours worked over 40 in a work week and will be entitled to paid sick leave like other hourly employees.
The proposed rules do not provide exceptions for small businesses or nonprofits. Many small employers or nonprofits who currently classify EAP employees as exempt will be faced with the choice of raising employee salaries to meet the increased salary levels or paying those employees overtime pay. Employers should carefully review the proposed changes to the EAP exemptions and consider participating in the public comment and public hearings before the rule changes are finalized.
To hear more about L&I’s proposed EAP exemption changes and other updates to employment laws, please join me and the Apple Valley Human Resources Association on Dec. 12 for our annual Employment Law Summit at the Wenatchee Convention Center. More information can be found at avhra.shrm.org.
Erin McCool is a Member in the Wenatchee office of Ogden Murphy Wallace, PLLC, practicing in the areas of litigation, employment and labor law, and land use and water. She provides advice and consultation to local businesses, employers and municipalities regarding state and federal employment laws. While this article should not be considered legal advice, if you need legal advice, Erin can be reached at email@example.com or 662-1954.