Washington Overtime Updates

At A Glance

• Effective July 1, 2020 salary thresholds for overtime exempt employees will begin increasing and will continue to increase annually on January 1^st through 2028.
• Employers should use the Federal weekly salary threshold of $684 until January 1, 2021, as it is more favorable than the Washington weekly salary threshold of $675.
• New requirements for white collar, computer professional, and outside sales person overtime exemptions are effective July 1, 2020.

Introduction

Effective July 1, 2020 Washington state regulations for overtime and exempt employee classification are changing. Per the Washington Department of Labor and Industry the changes will affect executive, administrative, and professional (EAP) workers as well as outside salespeople and computer professionals across all industries in Washington.

Changes to these rules will mean some employers will have to provide overtime, minimum wage, and paid sick leave to some employees who were previously treated as exempt. In other cases, employers may need to increase salaries for exempt employees.

Salary Thresholds

Salary Exempt

Under the new regulations, effective July 1, 2020 salaried Washington employees must earn 1.25 times the minimum wage rate to qualify as exempt.  Thereafter, each January 1 through 2028, employees must earn certain salary thresholds based on employer sizes.

For each effective date, the size of the employer is based on the number of Washington based employees, including full-time or part-time employees.

Employer Size

Washington’s minimum wage is $13.50 per hour effective January 1, 2020.

** Employers should note, the Federal Salary threshold is $684.00 per week for salaried exempt employees and this must be the salary threshold used for the July 1, 2020 effective date. The federal threshold is more favorable than the state salary threshold, which is $675 effective July 1, 2020.

Computer Professionals

For Computer Professionals, including computer system analyst, computer programmers, software engineers, or other similar workers, the hourly basis for overtime exemptions changes on July 1, 2020 and increases on January 1 through 2022. 

*If an employee is compensated on a salary or fee basis, the following does not apply, they must be compensated at the exempt employee rates in the previous chart.

For each effective date, the size of the employer is based on the number of Washington based employees, including full-time or part-time employees.

Employer Size

Outside Salesperson

The salary thresholds do not apply to outside sales persons who meet the outside sales person exemption test.

Salary Exemption Test

Employees who are overtime exempt, must meet certain qualifications to be exempt.

White collar exemption:

1. Salary Basis test: The employee receives a fixed salary that is not subject to reduction based on variations in the quality or quantity of work.
2. The Duties test: The employee performs certain types of job duties that primarily involve executive, administrative, or professional duties as defined by the regulations.
3. Salary Level test: The salary must meet or exceed the minimum salary threshold.

The regulatory changes eliminated the current long and short job duties test, replacing them with a standard test.

Outside Salesperson Exemption:

1. Primary duties:
   1. Making Sales, including any sale, exchange, contract to sell, consignment for sale, shipment for sale or other disposition.
   2. Obtaining orders or contractors for services, or for the use of facilities for which a consideration will be paid by the client or customer
   3. Demonstrating products or equipment for sale
   4. In the sale of services and performance of the service sold when the compensation to the employee is computed on a commission basis.
2. Hours of work that do not include the primary duties do not exceed 20% of all hours worked in the workweek by non-exempt employees. Provided, that work performed incidental to and in conjunction with the employees own outside sales or solicitations, including incidental deliveries and collections, are not regarded as non-exempt work.
3. The individual is customarily and regularly engaged away from the employer's place or places of business in performing such primary duty.
4. The individual is compensated by the employer on a guaranteed salary, commission or fee basis and who is advised of the employee status as "outside salesperson."

Computer Professional Exemption:

Any employee who is a computer system analyst, computer programmer, software engineer, or other similarly skilled worker, and whose primary duty consists of one of the following:

1. The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications;
2. The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;
3. The design, documentation, testing, creation or modification of computer programs related to machine operation systems; or
4. A combination of the aforementioned duties, the performance of which requires the same level of skills.

The employee must also be compensated on a salary or fee basis, or on an hourly basis as prescribed in the legislation WAC 296-128-535.

Next Steps

Employers should examine current pay practices for currently exempt employees. If employers are not meeting the 2020 requirements, employers may need to re-classify employees and/or begin paying overtime for any hours worked over 40 hours in a week.

Additional information about the changes can be found on the Washington Labor and Industry Website.