State pitches new pay rules
Proposal would up minimum salary for exempt eligibility
Hundreds of thousands of workers could earn overtime pay under a new proposal from the state Department of Labor and Industries.
The proposed changes would significantly increase the minimum amount employees must earn before they can be exempt from receiving overtime pay and could impact more than 250,000 workers, according to the agency.
The changes, which affect executive, administrative and professional workers, as well as outside salespeople, across all industries, could mean some employers will have to provide minimum wage, overtime and paid sick leave or increase salaries to those who were previously considered exempt.
The state’s proposal also updates the test used to determine who qualifies for the overtime exemption and more closely aligns the state rule with federal standards.
Washington employers currently are using the federal threshold, which allows salaried workers to be exempt from overtime if they perform certain types of work and are paid at least $455 per week, or about $24,000 per year.
The current state threshold, which was last updated 43 years ago, sets a level that’s even lower, at $13,000 annually.
The proposed rule calls for restoring the protections by setting higher salary thresholds, which would increase incrementally to 2 1/2 times the minimum wage by 2026, depending on the size of the employer.
To meet the proposed new requirements, employers with 50 or fewer employees would have to pay overtime-exempt workers a minimum of $675 a week, or about $35,000 a year, beginning July 1, 2020, increasing to a minimum of $79,872 per year by 2026.
Larger companies with 51 or more employees would have to pay overtime-exempt workers about $945 a week, or about $49,000 a year beginning in 2020, increasing to $79,872 per year by 2026 — the same salary level required for small businesses.
The Association of Washington Business, which serves as the state’s chamber of commerce, isn’t a fan of the proposal, saying it goes too far and would have a ripple effect on every business in the state.
“Requiring employers to pay salaried workers at least $79,872 per year by the time this rule is fully implemented and linking future pay increases to the state minimum wage is an astonishing increase over the current overtime rule and will likely catch many small businesses and nonprofits by surprise. If adopted, this rule will create a new super minimum wage that will impact every business in the state, even those that don’t employ exempt workers,” AWB President Kris Johnson said in a statement.
Johnson agreed that the current rule needs updating but said the Labor and Industries proposal goes too far, saying it “risks a variety of unintended consequences including a reduction in program offerings at nonprofits, fewer opportunities for employees to advance into salaried management positions, and reclassification of employees from salaried to hourly positions.”
Washington’s overtime rules, last updated in 1976, haven’t changed in more than 40 years. During that time, the percentage of white-collar workers who are considered exempt from overtime and other worker protections has grown substantially. Meanwhile, the minimum amount exempt workers must earn in the state has remained unchanged. As a result, some salaried workers can be paid less than minimum wage, don’t receive overtime and are not entitled to paid sick leave.
“The current system is out of date. It’s at risk of failing tens of thousands of workers by broadly defining what a white-collar worker is, which allows businesses to pay salaries that may be even less than minimum wage,” said Labor and Industries Director Joel Sacks in a news release. “That’s especially true for employees who are expected to work well over 40 hours a week, but don’t get paid overtime.
“We want to make sure that people who legitimately deserve overtime get paid for the extra hours they work,” Sacks said. “Washington’s minimum wage has been updated repeatedly for decades; this hasn’t been. This proposed rule links future salary thresholds to the minimum wage.”
The formal proposed rule is the next step in a multi-year process that has involved two pre-draft rules, multiple public feedback sessions — including one in Kennewick — and several meetings with business, labor and nonprofit representatives to exchange ideas.
Working Washington, a statewide workers’ organization focused on raising wages and improving labor standards, is in favor of the proposal.
“It’s about time,” said Rachel Lauter, executive director of the group, in a statement. “The state’s plan to restore overtime protections will return millions of hours a year to people in our state. Hundreds of thousands of workers will get back the time they need to care for their families, give to their communities, pursue their dreams, and just live their lives. It’s another example of how Washington state is leading the nation on workers’ rights and growing our economy because of it.”
Gov. Jay Inslee said the state is frequently ranked among the top economies and best state for workers in the country and that the update is overdue.
“Overtime protections ensure workers are fairly compensated when they work more than 40 hours in a given week — time that would otherwise be spent with their families and in their communities. The erosion of this threshold over time has left too many workers behind,” he said in a statement.
By 2026, exempt salaried workers would have to be paid at least 2.5 times minimum wage and meet the job-duties test.
Along with updating the required salary threshold, the proposed rule would change the method used to determine if an employee is doing work that allows them to be classified as exempt. The state currently uses two “duties tests” to make this determination.
Under the proposal, they’d be combined into one test that would align more closely with the method used at the federal level. The change would make the process simpler for employers, and increase the likelihood that workers are correctly classified, according to Labor and Industries.
The public comment period ends Sept. 6 and Labor and Industries will consider all input received in preparing a final rule.
The formal rulemaking process could take up to six months. Labor and Industries expects to adopt the rule in late 2019.
“We know we’re proposing a significant change, and it’s important to have a serious discussion and hear all views,” Sacks said.
More information about the proposal is on the lni.wa.gov/WorkplaceRights/Wages/Overtime/OvertimeRules/default.asp.
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