Washington L&I considers salary revision for exempt employees

The Washington State Department of Labor and Industries could soon be proposing new wage requirements for salaried executive, administrative and professional employees.

The wage requirements would be tied to the state’s minimum wage, which is set to go up $1.50 every year through 2020 with the passage of Initiative 1433. The current proposal would increase exempt salaries between one-and-a-half to three times that of hourly, minimum wage workers. In 2019, that could mean that salaried, overtime-exempt employees could earn annual wages between $37,440 to $74,880. In 2020, that number could be as high as $84,240 a year.

L&I released its first pre-draft proposed rule revisions Oct. 5. Public comments on the revisions were accepted until Oct. 28. They held listening sessions in Richland, Everett, Tumwater and Spokane.

Another preliminary draft will be released in the next few weeks, which the public can comment on. The formal draft rules will be released around the end of this year or early next year. The process could take up to six months and will provide opportunities for public input, including public hearings.

Minimum salary requirements for salaried executive, administrative and professional employees currently sit at $250 a week in Washington, or $13,000 a year — and it hasn’t changed since 1976. In comparison, hourly full-time workers on minimum wage earn up to $24,960 and are eligible for overtime pay.

“That’s much less than you would get on minimum wage,” said Tim Church, public affairs manager for the state Department of Labor and Industries.

“In general, the business community has expressed concern, if it was raised, it could have significant impact on small business,” Church said. “We’re hearing from people who are employees and who represent employees. They’re saying it’s time to change; the requirements are entirely out of date.”

The Tri-City Regional Chamber of Commerce sent out information about the hearing that happened in Richland, as well as encouraged members to provide public comment on the state’s L&I website.

“The hearing was interesting,” said Stephanie Swanberg, government and regional affairs manager at the regional chamber. “There were probably 40 people that attended. I stood up and asked what companies could be negatively affected and everyone in the room raised their hand, except two people, and they were there representing unions.”

Swanberg said the sentiment in the room was the same across the board — it’s “unsustainable” and “obtrusive” and businesses and nonprofits would be forced to make changes that will impact their employees, and in the case of nonprofits, the funding for their programs.

“We don’t have a lot of salaried employees, and the ones we have are truly exempt, but the problem I have with the proposed rule, and I know the rules are badly outdated, but the methodology concerns me. They plan to use minimum wage with a multiplier of one-and-a-half to three, anything more than one-and-a-half would cause real harm to many service businesses like mine,” said Steve Simmons, owner of CG Public House restaurant in Kennewick. “In 2020, the minimum wage will go up to $13.50 — that in itself is enough of an impact without our salaried employees getting a salary increase that may or may not be justified.”

Bob Battles, general counsel and government affairs director for the Association of Washington Business, said his organization opposes attaching salary thresholds to the state’s minimum wage. He also said salaried executive, administrative and professional employees also fear the unintended consequences of these revisions — like being forced to go back to hourly pay.

“If you think about small businesses and retail, managerial positions are not making that amount,” Battles said. “We’ve heard testimony from nonprofits saying they would have to eliminate certain positions because they can’t pay overtime. Employees take pride in having a salaried position and they worry they’re going to have to go back to hourly.”

“We oppose the draft and we have submitted written responses,” Battles said. “They are creating a situation where small businesses can’t afford to survive. Small businesses are going to have to make decisions, pay (employees) more to do more work, or you can’t work overtime and your salary is still reduced. These will be the unintended consequences.”

Meanwhile, the U.S. Department of Labor is also re-examining the federal rules surrounding the overtime exemptions. The federal government tried to pass similar rules under the Obama administration, but those revisions were blocked from going into effect due to a federal court injunction and were found unlawful after two lawsuits brought by a coalition of 21 states and business groups led by the U.S. Chamber of Commerce.

The current federal requirement is that employees can’t be considered salaried employees — and exempt from receiving overtime pay — if they make less than $23,660 annually, or $455 weekly.

Battles said AWB believes state rules should try and mirror federal rules as closely as possible. Therefore, he hopes L&I waits to see what the federal government ultimately decides.

“We would not oppose a rule that aligns with the federal government,” he added.

The draft proposal also includes revisions to the definition of executive, administrative and professional positions and changes to the duties test — which deems an employee capable of performing the tasks associated with the position.

For more information on the draft rule revisions proposed visit https://lni.us.engagementhq.com/learn-about-eap-exemptions.

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